Chinasoft International Ltd (CFTLF)

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China Software International: Issuing national depositary receipts to accelerate cloud business and asset revaluation.

source
https://finance.sina.com.cn/stock/relnews/hk/2021-01-29/doc-ikftpnny2657480.shtml

January 29, 2021 11:01 Flushing Financial Research Center

Industrial Securities releaseda research reportonChina SoftwareInternationalon January 28. Thesummary is as follows:
It is recommended to issue Chinese Depository Receipts and continue the cloud deployment. The company issued an announcement that the board of directors has approved the preliminary proposal for the possible issuance of Chinese depositary receipts and listing on the Chinese securities exchange platform. The preliminary proposal is to issue no more than 15% of the total number of issued shares of the company after the expansion. The proceeds from the proposed domestic issuance are initially proposed to be used In the company's cloud and other major businesses. The issuance of Chinese depositary receipts back to the A-share listing will help expand financing channels, help the company's cloud business investment, increase digital transformation services, and at the same time help increase the focus of Hong Kong stocks and increase valuation.

The epidemic promoted cloud migration, and cloud intelligent services exploded rapidly. In recent years, the company has focused its efforts on cloud intelligence business, creating an ecological platform for Jiefang's technical services and solutions, providing full-stack cloud services such as big data , cloud application development, and cloud management, and has been ranked TOP3 in China's cloud management service market for two consecutive years. The 2020 epidemic has further promoted the trend of cloud migration. The government's digital management needs and the online development of human service transactions have brought about the growth of Jiefang's cloud collection business and the Z plan, and cloud service revenue has exploded rapidly. In the first half of 2020, the company's cloud intelligence business revenue reached 1.23 billion yuan, a year-on-year increase of 34%, and its revenue accounted for 20.3%. The management guided the target revenue of cloud intelligence business to 300/500,000 yuan in 2020/2021.

Deeply participate and acceptContribute to Huawei's ecological construction. Huawei is the company's largest customer, accounting for more than 50% of its revenue. The company is a first-tier distributor of Huawei Cloud in 14 provinces and cities, and has reached tens of thousands of customers, expanding its customer base while selling. At the same time, the company has in-depth cooperation with Huawei in Kunpeng, Industrial Cloud, and Hongmeng. In May 2020, the company and Huawei jointly established a Kunpeng computing ecological benchmark in Chongqing , and became Huawei HiLink in November.Ecological solution service providers, as Kunpeng and Hongmeng Ecological gradually land, will further increase revenue for the company.

Investment advice:
Maintain the "Buy" rating. The company's cornerstone business and cloud intelligence business are driven by two wheels, and will continue to benefit from Huawei's ecological construction. The company's 2020/21/22 revenue is expected to be 144.7/184.1/225.9 billion yuan, and net profit attributable to the parent is 9.3/12.0/14.9 billion yuan.Yuan, EPS is 0.37/0.47/0.59 Yuan. Based on our earnings forecast for 2021, we assign a PE valuation of 24 times, corresponding to a target price of HK$13.4, and maintain a “buy” rating.