[ET Net News Agency, 15 January 2018] Citi Research cut its target price for China
Unicom (CU)(00762) to HK$14 from HK$14.5, and maintained its "buy" rating.
The research house expects CU could continue to improve 4G growth with distribution
channel innovation, but with fewer price cut efforts in 2018. Citi believes CU's 4G
marketing strategy has become more effective, and CU's operational efficiency will further
improve after mixed ownership reform.
It expects CU to continue to gain momentum in mobile subs share, but it has fixed-line
growth challenges as China Mobile (CM)(00941) aggressively defends revenue share. CU could
have margin/earnings pressure in FY2018, but with positive catalysts from mixed ownership
reform progress and Towerco IPO.
Citi reduced its CU FY2018-19 earnings forecasts by 10-14% each year mainly on lower
margin assumptions, and maintain FY2017 earnings largely unchanged. It expects flattish
EBITDA margin trends for CU in the next two years, dragged by personnel cost hikes and
more opex to cultivate new revenue streams. (KL)