We maintain the TP at HK$5.00 and the investment rating as "Buy". We forecast FY22-FY24 EPS to be RMB0.540/ RMB0.593/ RMB0.631, respectively. Considering rising profitability and dividends, we maintain the investment rating as "Buy" and TP at HK$5.00.
　　China Unicom’s 1HFY22 results were in line with our expectations.Service revenue increased by 8.3% yoy. EBITDA increased by 3.9% yoy while EBITDA as a percentage of service revenue fell by 1.4 ppt yoy to 31.9%.Shareholders' net profit was up by 19.5% yoy.
　　We expect industry internet business revenue to achieve yoy growth close to 30% in 2022. The Company plans to increase its cloud CAPEX by 88% yoy and computing power CAPEX by 65% yoy in 2022; we expect continuous investment by the Company and strong market demand to enable its businesses to maintain strong growth in 2H22. Given rising number of IoT connections, we expect growth rate of IoT revenue to still be high.
　　We expect future dividend payout to exceed market expectations. Given that industry internet business is still in the investment phase, we expect technical support expenses and cost of IT services to still record sharp increase in 2H22. In the full year of 2022, we expect growth of capital expenditure to be basically in line with growth of service revenue. Overall, we expect EBITDA margin to still decline but shareholders' net profit to increase steadily. We expect that while EPS of the Company will improve, dividend payout ratio will also rise, and the dividend payout may exceed market expectations in the future.
　　Catalyst: Increase in dividend payout ratio.
　　Risk warning: Slower-than-expected growth of industry internet business; increased competition may put pressure on ARPU.