News Alert: Board of Unicom A approved restricted share incentive scheme

  • Unicom A (600050 CH) has approved second phase of its restricted share incentive scheme by the board
  • It requires at least 11.82% and 16.85% revenue growth for FY22 and FY23 respectively compared to FY20, and higher than industry average
  • The estimated industry average revenue growth is 18.1% and 24.7% for FY22 and FY23 respectively compared to FY20, much higher than the unlocking condition
  • Expect neutral share price reaction as the market would not interpret the revenue target as real guidance for CU

 What’s New

– China Unicom (CU, 762 HK) announced that its controlling shareholder Unicom A Share Company has approved the second phase of its restricted share incentive scheme by the board, on 31 Dec 2021 after market close.

– The revenue target is that the growth rate should be no less than 11.82% and 16.85% growth for FY22 and FY23 respectively compared to FY20 and average of industry peers.

– The estimated industry average revenue growth is 18.1% and 24.7% for FY22 and FY23 respectively compared to FY20, much higher than the unlocking condition set in the incentive scheme.

Our View:

– We expect neutral share price reaction as the market would not interpret the implied revenue growth of 4.7% and 4.5% y-o-y for FY22 and FY23 from the share incentive scheme as real guidance for CU.

– The market estimation of revenue growth for CU is 6.7%, 5.9% and 4.3% y-o-y for FY21, FY22 and FY23 respectively.

– As CU and Unicom A Share Company are two entities, only the revenue target is relevant to CU. Other targets for earnings growth, ROE and EVA are not directly applicable to CU.

– We currently rate BUY on the counter with TP of HK$7.8.