Inspur Electronic Information Industry Co.Ltd(000977)
Key investment points
In 2021, the performance achieved rapid growth, and the growth rate of 22q1 revenue exceeded expectations, increasing quarter by quarter in recent three quarters. In 2021, the company achieved a revenue of 67 billion yuan, a year-on-year increase of 6%, and the net profit attributable to the parent company was 2 billion yuan, a year-on-year increase of 37%. It is estimated that the Q1 revenue in 2022 will increase by more than 45% year-on-year, and the net profit attributable to the parent company will increase by 30-50% year-on-year.
The company’s Q1 revenue exceeded expectations, and the revenue growth rate increased quarter by quarter for three consecutive quarters.
During the period of improving operating efficiency, the expense rate reached a new low, and the stock preparation led to a significant increase in inventory and a net cash outflow. In 2021, the operating efficiency of the company was further improved, and the sales and management expense rates decreased by 0.78 and 0.22 PCT respectively. During the period, the expense rate was 7.52%, a record low. Under the background of the epidemic and trade friction, the global supply of components is tight and the price rises. In order to ensure supply and delivery, the company has increased its stock, resulting in a 105% increase in inventory in 2021 and a net cash outflow from operating activities of RMB 8.290 billion. The tight supply situation is expected to be alleviated by the end of 2022.
The revenue of the industry and emerging Internet customers increased rapidly, and the head Internet and overseas revenue fell temporarily. In 2021, the company achieved over 80% revenue growth in the financial and communication industries, nearly 50% growth in other enterprise customers, and the growth rate of emerging Internet enterprises is also obvious. Due to the influence of industry regulation and other factors, the income of Internet enterprises decreased, and the overall overseas revenue decreased significantly. We have observed that the growth rate of operating capital expenditure of Alibaba and Tencent has rebounded significantly in 21q4. Combined with the high growth predicted by the company in 22q1, the demand of Internet enterprises in the head has warmed up in the short term. If the sustainability is further verified in 22q2, the annual performance can be expected.
Profit forecast and valuation
We predict that the company’s revenue from 2022 to 2024 will be 77.473 billion yuan, 91.302 billion yuan and 109518 billion yuan, with growth rates of 15.55%, 17.85% and 19.95% respectively; The net profit attributable to the parent company was 2.408 billion yuan, 3.015 billion yuan and 3.896 billion yuan respectively, with growth rates of 20.25%, 25.19% and 29.22% respectively; Corresponding to the current share price, PE is 17, 13 and 10 times respectively. We continue to be optimistic about the leading position of China’s digital economy infrastructure industry and the company. Combined with the compound growth rate of performance and the valuation of comparable companies, we give the company 25 times the target PE in 2022, with a target price of 41.42 yuan and 51% space, maintaining the “buy” rating.
The risk indicates that the demand of China and overseas server market is lower than expected; Tight supply of components and rising prices; Rising labor costs; Impairment of inventories; Exchange rate fluctuations; Industry competition.
