China Unicom (600050): Good cost control accelerates mining of government and enterprise markets

China Unicom (600050): Good cost control accelerates mining of government and enterprise markets

Event: The company released the 2019 performance forecast on January 22, and it is expected that net profit attributable to mothers will be about 49 in 2019.

80,000 yuan, an increase of about 22% in ten years.

Comments: 1. The growth of innovative business continued to be strong, the cost control remained good, and the company’s performance grew steadily. According to the company’s announcement, the company’s net profit attributable to its mother in 2019 was approximately 49.

80,000 yuan, an annual increase of about 22%, of which, in the fourth quarter of a single quarter achieved net profit attributable to mother about 6.

64 ppm, an increase of about 8 in ten years.


The overall main business revenue in 2019 is expected to stabilize and slightly rebound. Among them, affected by the speed increase and fee reduction, market saturation, fierce market competition, and the gradual fading of 4G traffic dividends, the revenue from mobile main business in 2019 is expected to be higher than in 2018The annual decline is expected to be lower than the -6 in the first three quarters.

1% increase slows down.

Benefiting from the rapid growth of innovative business, the fixed line main business revenue in 2019 is expected to continue to maintain good growth.

2. 5G co-construction and sharing Expansion of operator’s operating environment marginal improvement. It is expected to drive operators to increase ARPU value. 5G co-construction and sharing are determined. Unicom will cooperate with China Telecom to build a 5G access network and co-construct 5GThe sharing adopts the access network sharing method, the core network is constructed separately, and 5G frequency resources are shared.

Co-construction and sharing is expected to reduce network investment, save a lot of capital expenditures, tower usage fees, network maintenance costs and electricity costs, etc., in order to promote the improvement of network efficiency and asset operation efficiency, and accelerate the pace of 5G network construction.

At the same time, starting in 2019, the three major operators have gradually adjusted their business strategies (such as not assessing market share, stopping the sale of unlimited data packages, reducing market sales costs, not doing terminal subsidies, and not doing channel remuneration, etc.), and market competitive advantages.From the return of vicious competition to value competition, the cost of the three major operators in market competition is expected to decrease, and the ARPU value of 4G users has prompted a bottom-up.

With the gradual increase in the number of 5G users, the inflection point of the company’s overall ARPU value gradually emerged.

3. Hybrid reform is actively promoted. Flexible structure and market-oriented incentives have become the company’s strongest competitiveness in developing the 5G vertical industry market. In 2019, the company further deepened the hybrid reform, and the Yunnan branch expanded entrusted contracting operation cooperation to the province, with profit as the goal.Entrust a private operating company to contract the operation.

Smart Footprint (a big data service company joint venture with Telefónica) and Unicom Zhiwang Technology (a connected vehicle subsidiary) have respectively dated Jingdong Digital Technology and nine major car companies into strategic shares.

Promote the reform of small-scale contracting, implement gross income assessment and incremental revenue sharing.

As of 2019H1, the country has established small units2.

40,000, 2.

20,000 small CEOs form a differentiated compensation decision system linked to efficiency and efficiency.

The reform of the mechanism and system has effectively enhanced the company’s vitality, which is conducive to the company’s development of new 5G applications in vertical industries and the creation of new revenue sources.

At present, China Unicom’s 5G Application Innovation Alliance has more than 500 members, and has signed 5G industry cooperation agreements with 180 key industry customers.

With mobile and telecommunications indexes, China Unicom’s flexible organizational structure, higher decision-making efficiency, and market-oriented employee incentives are more conducive to adapting to the development of 5G vertical industries that are fragmented and changing in the field.

4. The growth of business to B is strong, accelerating the mining of the government and enterprise market in the 5G era. The blue ocean government and enterprise market is digitized, and demand for automation and intelligent reform is strong. Operators have mastered the core spectrum resources. This is a path that cannot be bypassed by vertical industry applications of 5G networks.

In the 5G era, the company will go deep into the business operation levels of various vertical industries, incubate products in the “intelligent connection + traffic” category, “integration + operation” category, and “open platform + application” category, and customer potential will be significantly improved.

At present, it mainly focuses on key industries such as new media, industrial Internet, transportation, education, medical care, cultural tourism, etc., and cooperates with key customers in the industry to create typical 5G application scenarios and form a demonstration effect.

The number of global 5G users is rapidly increasing, and the 5G business model is gradually becoming clear. In the era of 5G transformation, the company 北京夜网 is expected to jump from pipeline to a comprehensive digital operation complex.

In the first half of 2019, the company’s revenue from government and enterprise customers reached 46.2 billion U.S. dollars, an increase of 14% year-on-year, and its revenue accounted for more than 30%, so that government and corporate income maintained a rapid growth.

As a pioneer who embraces reform, it is expected to re-enable in the 5G era and open a new chapter in development.

5. In the 5G era, ARPU is promoted to the development of major industry B. The company enters the starting point of the boom cycle and maintains the “strongly recommended-A” rating. 5G enables digital transformation in vertical industries. Operators cannot use 5G networks in vertical industries.

China Unicom’s mixed reform has begun to bear fruit, with a flexible 成都桑拿网 organizational structure, higher decision-making efficiency, and market-oriented employee incentives. The company has a breakthrough competitive advantage in the B-Blue Ocean market, and the company is expected to usher in new development opportunities.

Compared with the global mainstream operators, the company is estimated to have room for improvement.

The mainstream PBs of overseas mainstream operators are generally more than 2 times. Back in history, companies in the 3 / 4G cycle are also expected to exceed 2 times PB. The current company valuation is 1.

Three times, still at a relatively historical low level, we think that there is room for improvement in the future.

It is expected that the company’s net profit for 2019-2021 will be 49.

8.5 billion, 63.

09 billion, 79.

920,000 yuan, corresponding to 36-20 PE in 2019-2021.

6X, 28.9X and 22.

8X and PB are 1.

3, 1.

2 and 1.

2 times, maintaining “strongly recommended-A” grade.

Risk reminder: intensified competition in the operator market, 5G expansion is less than expected, and cost control is less than expected