\u3000\u30 China Baoan Group Co.Ltd(000009) 38 Unisplendour Corporation Limited(000938) )
Key investment points
The performance was in line with expectations, and the net profit of Xinhua 3, the main subsidiary, increased by 22.24% year-on-year
Xinhua III, the company’s main subsidiary (the company holds 51% equity): the operating revenue was 44.351 billion yuan, a year-on-year increase of 20.52%; The net profit was 3.434 billion yuan, a year-on-year increase of 22.24%. Xinhua III revenue split: (1) China’s Government Enterprise Market: revenue was 36.258 billion yuan, a year-on-year increase of 22.56%; (2) Operator market: the revenue was 6.415 billion yuan, a year-on-year increase of 13.04%; (3) International Business: the revenue was 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%.
Ziguangyun, a holding subsidiary, had a revenue of 1.009 billion yuan, a year-on-year increase of 67.84%, a net profit attributable to the parent of -90.741 million yuan, and a year-on-year decrease in loss of 43.55%.
Subsidiary Ziguang Digital: revenue of 21.22 billion, down 11.41% year-on-year; The net interest rate attributable to the parent company was 265 million, a year-on-year decrease of 11.07%. We believe that the distribution business of Ziguang digital has the attribute of heavy capital operation. Affected by the debt restructuring of Ziguang group in 2021, it is expected that the credit of banks and upstream IT enterprises will decline due to the reduction of credit. With the completion of the subsequent debt restructuring of Ziguang group, the distribution business is expected to recover.
Purple light software: the revenue was 2.859 billion, with a year-on-year increase of 21.87; The net profit attributable to the parent company was 686213 billion, a year-on-year increase of 5.55%.
The growth rate of net profit in the single quarter of 2021q4 was – 4.92%, while the growth rate of net profit in the single quarter of 2021q3 was 77.33%
According to our analysis, the reason should be: the R & D plus deduction is mainly concentrated in the fourth quarter in 2020, while some R & D plus deduction has been carried out in 2021q3 according to the policy, which is caused by the inconsistent time mismatch of R & D plus in two comparable seasons.
Net operating cash flow was -2.180 billion (50.10 in 2020), a year-on-year decrease of – 143.51%. We believe that there are two reasons: (1) main reasons: the business volume growth of subsidiary Xinhua III and the increase in cash paid for procurement due to strategic goods preparation in 2021. (2) Affected by the debt restructuring of Ziguang group, it is estimated that the credit of banks and upstream IT enterprises will be reduced, which will require a lot of cash procurement, resulting in a certain impact on the cash flow.
Driven by policies such as digital economy and digital computing in the East and the west, the digital transformation of government enterprise market is accelerated, which is conducive to driving the rapid growth of the company’s business. The company is expected to usher in higher quality development and accelerate the transformation of cloud service mode
The main downstream enterprises of the company are large and medium-sized enterprises and the government. Driven by policies such as digital economy and East West computing, under the background of digital economy, the IT transformation needs of large and medium-sized downstream enterprises of the company have increased, and the ability to pay it budget expenses is strong, which is conducive to driving the rapid growth of the company’s business.
According to the company’s annual report, the company promotes the high-quality development of the company through the strategy of deeply cultivating the government enterprise market, continuously building a new strategic partnership with operators, vigorously expanding the commercial market and steadily developing overseas markets. At the same time, deepen the company’s market expansion and brand promotion in the field of cloud and intelligence, cooperate with ecological partners to carry out intelligent application innovation, and accelerate the company’s transformation to cloud service mode.
Profit forecast and valuation
The performance is in line with expectations. The net profit of Xinhua 3, the main subsidiary, increased by 22.24% year-on-year. With the digital economy, East digital West computing and other policy driven, and the digital transformation of government enterprise market, the company is expected to usher in high-quality development and accelerate cloud transformation. According to the annual report of 21 years and the changes in the market and the company’s operation, we expect the net profit attributable to the parent company to be RMB 2.693 billion, 3.418 billion and 4.242 billion respectively in 22-24 years, with a year-on-year growth rate of 25.41%, 26.92% and 24.11%; The corresponding EPS is 0.94, 1.20 and 1.48 yuan, maintaining the “buy” rating.
Risk tips
1. If the epidemic situation changes in the future, it will affect the risk of it expenditure of downstream enterprises. 2. Market competition intensifies risks. 3. The operator’s business is less than expected risk. 4. Uncertainty risk of overseas business affected by epidemic situation. 5. The group’s debt problem is not resolved as expected.
