We maintain the TP at HK$8.00 and the investment rating as "Buy". We maintain FY23-FY25 EPS forecasts as RMB0.631/ RMB0.720/ RMB0.814, respectively. Considering the value revaluation brought about by the rapid expansion of the Company's industry internet business, we maintain the TP at HK$8.00 and the investment rating as "Buy". Our TP corresponds to 11.2x/ 9.8x/ 8.7x FY23-FY25 PER.
　　China Unicom's 1QFY23 results were in line with our expectations. In 1QFY23, the Company's service revenue increased by 6.1% yoy to RMB86,115 million, while sales of telecommunications products increased 41.9% yoy. Industry internet business revenue increased sharply by 15.3% yoy, and its proportion to total service revenue rose by 2.1 ppt yoy to 26.0%. Shareholders' net profit was up remarkably by 11.2% yoy to RMB5,155 million.
　　Profitability level to be steady, and the development of the industry internet business is expected to exceed market expectations. In 1Q23, mobile service and fixed-line broadband access revenue increased yoy by 4.4% and 3.1%, respectively; we believe that mobile business and fixed-line broadband business revenue will maintain relatively stable growth, but in terms of whole house intelligence, ARPU still has room to improve. From a cost perspective, due to the expected low CAPEX growth this year, pressure on depreciation and amortization will be eased. Meanwhile, the discount on tower fees and the withdrawal of 2G and 3G networks will reduce pressure on operation and maintenance expenses. Thus, we expect that growth rate of operating expenses will be lower than that of revenue, so we expect to EPS to maintain double-digit growth this year. In 1Q23, revenue from cloud and big data increased yoy by 40%/ 54.2%, respectively. Due to strong needs from government, advantages of operators in data security and cloud network integration, as well as large scale investments in cloud resources reserve, we expect the Unicom cloud business to still achieve rapid growth. In terms of IoT business, the Company has a leading position in the factory-installed internet-of-vehicles market, and based on its platform capabilities, the Company is focused on the layout of smart city, industrial manufacturing and reliable supply chain to iterate industry standardization solutions. Data factors play an extremely important role in the construction of digital China, while operators have a large number of data assets; we believe that in the future, operators will promote the development of businesses related to data at the strategic level, and the development progress may exceed market expectations.
　　Meanwhile, in the past two years, China Unicom has been expanding its business boundaries through joint ventures, mergers and acquisitions and strategic investments; we believe that in addition to financial considerations, the extensive investment will also help the Company to access more industry data, thus helping the development of its data-related business. As a result, we believe that the Company's future growth in data factors will exceed market expectations.
　　Catalysts: Increase in dividend payout and dividend payout ratio; promotion of business data-related business.
　　Risks: Slower-than-expected growth of industry internet business; mismatch between investments and benefits.