\u3000\u30 China Baoan Group Co.Ltd(000009) 38 Unisplendour Corporation Limited(000938) )
Key investment points
The performance exceeded expectations, and the holding subsidiary Xinhua 3 group grew strongly in the first quarter
The revenue of Xinhua three Group Co., Ltd. was 10.472 billion yuan, a year-on-year increase of 27.78%; The net profit was 659 million yuan, a year-on-year increase of 33.06%, and the performance growth exceeded expectations. As a leading enterprise in the industry, Xinhua III still maintained strong growth under the conditions of epidemic situation and many uncertain factors in the global environment, reflecting the excellent business growth ability and anti risk ability of the company.
Our analysis shows that:
(1) external factors: under the background of digital economy, the acceleration of digital transformation in the field of government and enterprises and the promotion of industrial Internet have increased the demand for the company's basic network, computing power, storage and other products, resulting in the rapid growth of ICT infrastructure product revenue;
(2) internal causes:
A. the company's capabilities of new products and solutions have been continuously enriched and enhanced, digital solutions have been continuously applied, and the company's business growth in the field of cloud and intelligence is good.
B. internal organizational structure of the company: from industrial BG to newly established commercial BG, constantly optimize the internal organizational structure, optimize China's sales system, multi-level solutions, and coordinate the development of industrial market and commercial market; At the same time, we have steadily explored overseas markets, and the product sales revenue and the number of overseas partners have continued to increase. Overcome the adverse effects of the epidemic and actively promote contract delivery.
The gross profit margin has reached a new high since 2019q3. We believe that the main reason is: the accelerated growth of network products (higher than the gross profit margin of servers) + the growth of new high-performance network products with higher gross profit margin
The gross profit margin of Q1 in 2022 was 21.93% (18.35% in 2021q1 and 18.98% in 2021q4), the highest since 2019q3. The two most important parts of Xinhua's three revenue structure: network and server. In the context of digital economy, new digital infrastructure, digital transformation and industrial Internet construction have increased the demand for networks. Logically, we believe that the increase of gross profit margin should be mainly due to the accelerated growth of network business. For the structure of network products, with the introduction of new high-performance network products in recent two years, the gross profit margin of these new products also contributes to the improvement of the gross profit margin of the company.
R & D expenses increased by 33.63% year-on-year, mainly due to:
The company adopts the net method to calculate government subsidies. In this period, the government subsidies related to R & D received by the company's subsidiary Xinhua 3 Group Co., Ltd. decreased, offsetting the decrease in R & D expenses. In the first quarter, the company increased strategic investment in "cloud smart native" technology, strengthened the deep integration of digital technology and industry application scenarios, and continued to upgrade and improve products and solutions.
The net cash flow from operating activities was -2.327 billion yuan, a year-on-year decrease of 171.43%
It is mainly due to the increase of business volume and goods preparation of the company's subsidiaries and the increase of cash paid for procurement. Our analysis shows that under the background of strong supply chain capacity and current core shortage, the company will strengthen the preparation of goods, which is conducive to ensuring the delivery of products and business.
Looking forward to the whole year, under the background of digital economy, the digital transformation of government enterprise market will accelerate
The latest 11th meeting of the central financial and Economic Commission said: layout and build a new generation of supercomputing, cloud computing, artificial intelligence platform, broadband infrastructure and other facilities. As a leading enterprise in the field of ICT infrastructure products, under the influence of internal and external favorable factors, we are optimistic about the company's business expectation for the whole year.
Profit forecast and valuation
Q1 performance ushered in a good start. The net profit of Xinhua 3, the main subsidiary, increased by 33.06% year-on-year, and the outlook for the whole year is optimistic. It is estimated that the net profit attributable to the parent company in 22-24 years will be 2.693 billion yuan, 3.418 billion yuan and 4.242 billion yuan respectively, 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 the expected risk. 4. Uncertainty risk of overseas business affected by the epidemic. 5. The group's debt problem is not resolved as expected.
