We maintain China Unicom's (the "Company") TP at HK$8.00 and the investment rating as "Buy".
　　Considering the margin of safety from relatively high dividend yield and the value revaluation brought by the rapid expansion of the Company's industry internet business, we maintain the investment rating as "Buy" and the TP at HK$8.00. Our TP corresponds to 11.6x/ 10.2x/ 9.0x FY23-FY25 PER.
　　Steady earnings growth with strong dividend payout. The Company's service revenue and shareholders' net profit in 1H23 were RMB171.0 billion (+6.3% yoy) and RMB12.39 billion (+13.1% yoy) respectively, in line with market expectations. We believe the Company's net profit will continue to grow steadily over the next few years, thanks to the steady ARPU, as well as easing pressure on depreciation and employee benefit expenses.
　　The interim dividend payout ratio rose by 4 ppt yoy to 50%, and we expect that the full-year dividend payout ratio in 2023 to be about 55% and further increase in 2024 and 2025.
　　We expect the Company's industry internet business to exceed market expectations. The Company expects Unicom Cloud revenue to exceed RMB50 billion. We expect with the strong investment in computing power resources, the scale of Unicom Cloud will continue to grow. Due to the continuous investments in self-developed products and technology, the profit margins of Unicom Cloud still have room to improve. Big data revenue in 1H23 rose by 54% yoy. With the establishment of the National Data Bureau and the appointment of the National Data Bureau director, we believe that the state will vigorously promote and coordinate the development of data factors industry at the macro level. As data product suppliers, operators can provide data products and participate in the transaction process of data factor; as data processing and analysis providers, they provide data circulation infrastructure and play an important role in data circulation. We expect China Unicom to promote data factor related business at a strategic level, and the relevant business may exceed market expectations.
　　Catalysts: Increase in dividend payout and payout ratio; promotion of business data related business.
　　Risks: Slower-than-expected growth in industry internet business; mismatch between investments and returns.