China / Hong Kong Company Update: China Unicom

DBS Group Research maintains a BUY rating on China Unicom with a target price of HK$8.70. The investment thesis is centered on the company's strong network coverage in Northern China, its role as a key driver of the industry's internet business growth, and its commitment to improving shareholder returns through dividend hikes. The report highlights the company's co-building and co-sharing of a 5G network with China Telecom, which narrows the competitive disadvantage against China Mobile. DBS expects the industrial internet business, including IDC and cloud computing, to be a key growth driver, contributing 25% of total service revenue in 1H23. They also note that China Unicom is the only operator that has not committed to a dividend payout ratio, and they expect the payout ratio to increase from 50% in FY22 to c.54% in FY23.