\u3000\u30 China Baoan Group Co.Ltd(000009) 38 Unisplendour Corporation Limited(000938) )
Event: on March 25, 2022, the company released its annual report for 2021. The company achieved a total operating revenue of 67.638 billion yuan, a year-on-year increase of 12.57%; The net profit attributable to the parent company was 2.148 billion yuan, a year-on-year increase of 18.51%.
Comments:
The performance is in line with expectations and the value of the fist industry is prominent
In 2021, the overall revenue structure of the company continued to be optimized, and the core main ICT infrastructure and service business realized a revenue of 41.348 billion yuan, a year-on-year increase of 24.81%, accounting for 61.13% of the operating revenue; The business of IT product distribution and supply chain services developed steadily, with a revenue of 30.916 billion yuan, a slight increase of 1.07% year-on-year.
The company continues to upgrade ICT infrastructure products, lead the development of ICT industry technology, comprehensively optimize the digital solutions, cloud services and software development and integration business for the application scenarios of key industries, drive the implementation of more smart projects such as smart city, smart medical treatment, smart transportation and smart education, and enable the digital transformation of industry customers with the full stack of ICT capabilities.
The company has made in-depth layout of the “core cloud network edge end” industrial chain, promoted the implementation of the “cloud intelligence native” strategy and the newly upgraded “digital brain” application, continuously improved its overall revenue, continued to improve its profitability, continuously strengthened its competitive strength in the era of digital economy and expected to grow in the future.
The profitability is stable, and there is room for optimization in the follow-up
The overall gross profit margin of the company has decreased due to the impact of the structure, and there is room for improvement in the follow-up. The gross profit margin of the company mainly depends on ICT infrastructure and service business. From 2017 to 2021, the comprehensive gross profit margin of the company remained basically stable, slightly decreased from 21.97% to 19.17%, of which the gross profit margin of ICT infrastructure and service business decreased from 44.04% in 2017 to 25.67% in 2021, mainly due to the growth of the proportion of server business with low gross profit margin (the sales volume of Xinhua 3 x86 server increased from the fourth in 2017 to the second in 2021); The gross profit margin of it distribution, another major business of Ziguang, is relatively low, slightly increasing from 5.35% in 2017 to 7.90% in 2021; The gross profit margin of overseas business continued to increase, from 20.83% in 2018 to 34.95% in 2021. With the increase of the company’s market share, the optimization of product structure, the expansion of overseas market and the continuous volume of self-developed chips, we believe that the company’s comprehensive gross profit margin has room for further optimization.
Xinhua three wisdom enables digital transformation and upgrading to achieve rapid development
The core subsidiary Xinhua 3 continues to serve three major markets, enabling customer business innovation and digital transformation in the industry. The annual operating revenue was 44.351 billion yuan, a year-on-year increase of 20.52%, and the net profit was 3.434 billion yuan, a year-on-year increase of 22.24%. Xinhua III focuses on the three major markets of Chinese enterprise business, Chinese operator business and international business. Among them, Chinese enterprise business has achieved rapid growth, with an operating revenue of 36.258 billion yuan, a year-on-year increase of 22.56%; The business market position of Chinese operators has been continuously improved, with an operating revenue of 6.415 billion yuan, a year-on-year increase of 13.04%, and the annual delivery amount has increased rapidly; The international business showed a good growth trend, with an operating revenue of 1.678 billion yuan, of which the revenue of H3C brand products and services of Xinhua 3 reached 714 million yuan, a year-on-year increase of 48.81%, realizing a high-speed growth.
Chinese enterprise business: it has focused on the layout of digital transformation solutions in 18 industries and participated in the writing of 31 industry standards in 6 industries. Smart city, digital urban rail, smart hospital, smart Park, digital media and other solutions are in the leading position in the industry. During the year, it has successively released industrial Internet, smart mine, smart airport, smart water conservancy, smart emergency 5g industry edge and other forward-looking solutions, technology market service, all-round digital transformation and upgrading of industry customers.
Business of Chinese operators: Xinhua 3 has made continuous breakthroughs in the field of centralized purchase of operators, continuously consolidated its position as a core supplier, ranked first in the overall share of China Mobile’s centralized purchase of high-end routers and high-end switches from 2021 to 2022, and achieved the first breakthrough of vbras router equipment in China Mobile’s centralized purchase project; Obtain 20% share in the centralized purchase of new distributed block storage of China Mobile from 2021 to 2022, and realize the first breakthrough in the bidding project of China mobile block storage type; Successively won the bid for China mobile network cloud resource pool, PC server centralized purchase, hardware firewall centralized purchase and other projects. Win the bid for two packages of high-end firewall and middle-end firewall of 6 Lvjing Holding Co.Ltd(000502) 021 firewall centralized purchase project with the first share. Winning the bid of China Telecom Corporation Limited(601728) 2021 STN equipment construction project, China Telecom Corporation Limited(601728) core route switching equipment project and other key projects; Xinhuansan has deeply participated in the construction of intelligent man in 6 Wuhan Department Store Group Co.Ltd(000501) 9 provinces and more than 100 prefectures and cities, and has realized large-scale deployment in the cloud backbone private network in 7 provinces of China Mobile. The cumulative large-scale deployment in China Telecom Corporation Limited(601728) 5gstn bearer network covers 20 provinces and more than 90 prefectures and cities; Xinhua III and China Mobile jointly won the digital government project in Gansu Province, helping the Gansu government build the overall architecture of “12345 + n”.
International Business: Xinhua III established four subsidiaries in South Africa, Mexico, Turkey and Singapore in 2021, and completed the establishment of Filipino subsidiaries in early 2022, with 12 overseas subsidiaries. By the end of 2021, Xinhua III had 830 certified overseas partners, established spare parts centers in 24 countries and regions, and the service delivery can cover 135 countries
Based on the isomorphic hybrid Cloud Architecture, Ziguang cloud continued to build a core cloud platform and strengthen the ability to build cloud operation and service. In 2021, it achieved an operating revenue of 1.009 billion yuan, a year-on-year increase of 67.84%, a net profit attributable to the owner of the parent company of -90.741 million yuan and a year-on-year decrease of 43.55%. Ziguang cloud continues to build its core competence in cloud services and promote cloud business growth through in-depth collaboration. At present, it has built 43 nodes across the country, covering 22 provinces, including 8 self built nodes, 11 joint venture nodes, and 24 government cloud and exclusive cloud nodes.
Ziguang cloud has won many projects, and the layout of cloud computing has been continuously improved
In 2021, the core subsidiary Ziguang cloud company grew rapidly in cloud services, smart city and Industry Cloud:
Cloud services: successively won the bidding for Chongqing government cloud, Gansu six cities government cloud, Beijing government cloud and other cloud service projects.
In terms of smart city: ziguangyun and Xinhua III have cooperated in depth and successively won the bid for smart city in Yantai Economic and Technological Development Zone, smart Binhai City brain phase II, Qujing City brain, smart Qingcheng, Huai’an smart city and other projects.
Industry Cloud: focus on industrial cloud, construction cloud, water cloud and other industry clouds, build an integrated service system of platform + ecology + operation, deeply cultivate industry applications, and build core PAAS and SaaS capabilities. Ziguang Unipower industrial Internet platform jointly built by Ziguang cloud company and Xinhua III was selected into the “outstanding performer” quadrant of forresterwave China Internet Industrial Platform Research Report and the “major manufacturer” quadrant of IDC China Industrial Internet platform manufacturer evaluation report; Water cloud realizes deep cultivation and meticulous work in water management, water quality monitoring system and water informatization; Building cloud continues to make efforts in the direction of smart Park, smart construction site and housing construction informatization; Successively won the bid of Shenyang Industrial Enterprise shangyun 2021 project, Jiangjin District smart Park Industrial cloud project, Nanhu Watershed Governance water cloud project, etc.
China is a leader in many products and continues to invest in R & D to consolidate the leading position of ICT
In 2021, the market share of enterprise WLAN in China was 28.4%, ranking first in the market for 13 consecutive years; The market share of Ethernet switch in China is 35.2%, ranking the second in the market; The market share of router enterprises in China continued to rise from 31.3% in the previous year to the second place in the Chinese market; In China, the market share of X86 server increased from 15.4% in the previous year to 17.4%, ranking second in the market; In China, the market share of non-x86 server is 19.5%, jumping from the fourth in the previous year to the first; China’s blade server market share is 47.8%, and continues to rank first in the market; The storage market share in China is 12.6%, ranking second in the market; The market share of security hardware in China is 9.0%, ranking second in the market; In the first three quarters of 2021, the market share of super integration in China was 20.5%, and the market share rose to the first. The company invested 4.881 billion yuan in R & D in 2021, with a year-on-year increase of 14.15%. The continuous increase in R & D investment in ICT technology and solutions has laid a solid foundation for the rapid development of the company’s business and the improvement of market share.
Profit forecast and investment rating
The company is a leading enterprise of ICT equipment in China, with a complete “cloud network edge end core” industrial chain. In recent years, the company has made continuous breakthroughs in the operator’s high-end market and overseas market. We are optimistic about the company’s competitive strength and long-term development in the era of digital economy. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 2.654 billion, RMB 3.278 billion and RMB 4.057 billion respectively. The current closing price corresponding to PE is 20.97 times, 16.98 times and 13.72 times respectively, maintaining the “buy” rating.
Risk factors
The development of cloud computing industry is less than expected; Overseas business development is less than expected; The effect of debt restructuring of the parent company did not meet expectations.
