Event description:
China Unicom released its 2023 annual report. In 2023, the company achieved revenue of 372.6 billion yuan, +5.0% year-on-year; realized net profit of 8.17 billion yuan, +12.0% year-on-year. The 2023 ROE was 5.1%, a five-year high.
Incident reviews:
Networked communication services: Mobile services are aimed at “full 5Gization”, and the Internet of Things creates competitive advantages between 5G and REDCap. In 2023, the company's networked communication business (including mobile networking, broadband networking, television networking, dedicated line networking, communication services and information services) achieved revenue of 244.6 billion yuan, making steady progress overall. Among them, the number of mobile users reached 333 million, a net increase of 10.6 million users, a net increase of 90% over the previous year, and the 5G package penetration rate reached 78%, an increase of 12 pcts over the previous year. The number of broadband service users reached 113 million, a net increase of 9.79 million over the previous year. The net increase was a record high in the past ten years. In terms of ARPU value, the company maintained steady through “fixed mobile integration” and the development of home information services. In 2023, the ARPU values for mobile phone users and fixed network broadband users were 44.0 yuan (-0.3 yuan year on year) and 47.6 yuan (-0.2 yuan year on year), respectively. In terms of the Internet of Things, the company has 490 million connections, with 5G connectivity leading the industry in net growth share and Cat1 with a scale of 130 million. The Internet of Vehicles market share continues to lead the industry. The company released the world's first 5G Redcap module. The “grid” device management platform already has tens of millions of levels of concurrency and a scenario-based model to enable digital transformation and upgrading of industry customers.
The digital intelligence business is improving, and the share of big data services in the industry has exceeded 50% for 5 consecutive years. The company's digital computing business includes six major segments: Unicom Cloud, Data Center, Mathematical Integration, Data Services, Digital Intelligence Applications, and Internet Communications Security. It achieved revenue of 75.2 billion yuan in 2023, bringing more than half of the company's new revenue.
Among them, Unicom Cloud's revenue was 51 billion yuan, an increase of 42% over the previous year. It continues to strengthen the layout of multi-level intelligent computing centers to form the Yuanjing Big Model “1+1+M” (1 basic large model+1 large model platform+more than 10 major models for key industries) service capabilities. In terms of data services, revenue in 2023 was 5.3 billion yuan, up 32% year on year. It continues to lead the market share in the same industry and continues to improve data processing capabilities. The increase in daily data collection doubled to 1.2 PB year on year, and the total number of smart city service districts and counties exceeded 800. In terms of digital intelligence applications, large-scale results have been remarkable. The total number of 5G industry application projects has reached 30,000, served more than 8,500 5G private network customers, and 32 billion-yuan self-developed application products
Future outlook: Continue to achieve double-digit revenue and profit growth, decrease in total capital expenditure, and lay out the digital intelligence business moderately ahead of schedule. Regarding the 2024 business performance outlook, the company strives to achieve steady revenue growth and double-digit growth in total profit. Capital expenditure will be controlled at about 65 billion yuan, down 12% from the 2023 forecast, and continue to promote joint construction and sharing with telecommunications to increase 5G coverage capabilities. At the same time, the company will seize the rapid development opportunities of the big model industry, and the computing network business will adhere to a moderately advanced investment layout. Against the backdrop of shrinking capital expenditure and steady elite performance, we believe that the company will continue to increase its dividend ratio in the future. In 2023, the company's dividend per share will be 0.132 yuan, and the dividend rate will be 30.5%. Compared with mobile and telecom, there is still room for improvement.
Profit forecast, valuation analysis and investment suggestions: We expect the company's net profit to be 92.81/103.48/11.441 billion yuan respectively in 2024-2026, up 13.6%/11.5%/10.6% year on year; the company's performance growth is expected to remain at a high level in the industry, and ROE and dividend ratio are expected to continue to increase in the future, maintaining a “buy-A” rating.
Risk warning:
There is a risk that ARPU values for mobile and broadband services will decline. The company's 5G package penetration rate has exceeded 78%. As high-value 5G users complete penetration, the growth rate of mobile ARPU value will slow down in the future. If 5G traffic growth falls short of expectations or the development of integrated information services falls short of expectations, there is a risk that ARPU will decline.
There is a risk that the growth rate of emerging digital intelligence businesses such as Unicom Cloud will decline. The digital intelligence business contributed more than 50% to the new revenue in 2023. Unicom's cloud revenue growth rate in 2023 was 42% lower than the previous year. If competition in the cloud computing market is intense and the data service business falls short of expectations, there is a risk that the growth rate of emerging businesses will decline.