China Greatwall Technology Group Co.Ltd(000066) (000066)
1、 Event overview
On November 29, 2021, the company announced that the application for non-public offering of shares was approved by the development and Examination Committee of CSRC.
2、 Analysis and judgment
The company maintained rapid growth in revenue in the first three quarters and gradually released profits
According to the company’s announcement, the company achieved a revenue of RMB 11.871 billion in the first three quarters of 2021, a year-on-year increase of 59.13%, and a net profit attributable to the parent company of RMB 103 million, a year-on-year increase of 163.23%; Q3 achieved a revenue of 4.682 billion yuan in a single quarter, a year-on-year increase of 32.61%, and a net profit attributable to the parent company of 186 million yuan, a year-on-year increase of 35.17%. In the third quarter, the company continued the high-speed growth trend of Q1 and Q2 revenue, and realized the high-speed growth of overall net profit in the first three quarters through fine management.
Feiteng chip continues to grow and form effective synergy with the company’s business
According to the company’s announcement, Tianjin Feiteng, a joint-stock company of the company, achieved a revenue of 1.272 billion yuan in 2020, a significant year-on-year increase of 513.86%, and a net profit of 341 million yuan, out of the state of profit and loss balance for a long time. In the first half of 2021, Feiteng again achieved a revenue of 1.183 billion yuan and a net profit of 460 million yuan, which basically equaled the performance of last year’s annual revenue and exceeded the profit end. The company’s two-way server based on Feiteng was successfully shortlisted in the Industrial And Commercial Bank Of China Limited(601398) procurement directory, and successfully developed a series of ultra-thin notebook products based on Feiteng chip. We believe that Feiteng chip, as a leader in the field of domestic chips in China, is expected to further grow by taking advantage of the east wind of domestic development, and effectively cooperate with the company’s own servers and other businesses.
Private placement shows development confidence and vigorously distributes localization projects
On August 21, 2021, the company issued the announcement of fixed growth plan, and the total amount of funds to be raised is no more than RMB 3.987 billion. The core projects of the raised investment projects are domestic high-performance computer and server core technology R & D and capacity improvement projects, of which the total investment of domestic complete machine intelligent production line construction project is more than RMB 3 billion, demonstrating the company’s determination to develop domestic complete machine projects.
3、 Investment advice
The company is one of the main shareholders of Tianjin Feiteng, the leader of domestic chips. It has two advantages: chip and whole machine integration, and establishes a stronger dominant position in the substitution of government localization projects. At the same time, the gradual localization of key industries such as finance, power and telecommunications is the potential driving force for the company’s future performance growth. It is estimated that the company’s net profit attributable to the parent company from 2021 to 2023 will be 1.201/15.52/1.705 billion yuan, EPS will be 0.41/0.53/0.58 yuan respectively, and the corresponding PE will be 34x, 27x and 24x respectively. It will be covered for the first time and given a “recommended” rating.
4、 Risk tips:
The R & D of Feiteng chip is less than expected, and the market competition intensifies, resulting in the decline of the gross profit margin of the whole machine business
