China Unicom’s 1QFY22 results were in line with our expectations. Service revenue increased by 9.8% yoy. EBITDA increased by 5.9% yoy, while shareholders' net profit was up by 20.6% yoy.
　　We expect service revenue to increase steadily in 2022. Due to expected stable total mobile user base and promotion of ARPU from the rising 5G penetration rate, we expect mobile service revenue to increase steadily in 2022. We expect fixed-line broadband service revenue to increase yoy in 2022 due to rising number of subscribers and expected stable ARPU. Due to strong market demand from development of the digital economy, we expect industry internet revenue to be strong.
　　We expect operating expenses to grow rapidly in 2022. In 2022, we expect growth of network, operation and support expenses to grow strongly; we expect that growth of staff costs as well as growth of general, administrative and other expenses will be higher than growth in service revenue. We expect that costs of telecommunications products sold to still be in line with sales of telecommunications products in 2022. We expect that selling and marketing expenses as well as depreciation and amortization will have modest increase in 2022. We expect that EBITDA margin will decrease yoy but EBITDA will increase yoy in 2022.
　　We maintain the TP at HK$5.00 and the investment rating as "Buy". We revise up FY22-FY24 EPS forecasts by 1.2%/ 1.2%/ 1.5%, respectively. The TP represents 7.6x, 7.0x and 6.5x FY22-FY24 PER.