Chinasoft International Ltd (CFTLF)

[StockpickerCAPC]

Guotai Junan Securities: Chinasoft International maintains an overweight rating and a target price of HK$ 19.7

source
https://finance.sina.com.cn/stock/hkstock/hkgg/2021-06-04/doc-ikqciyzi7643370.shtml

June 04, 2021 10:01 Sina Hong Kong Stocks

Guotai Junan Securities released an updated research report, believing that Chinasoft International (00354) has formulated the SP301 plan and will grow rapidly in the next three years. With the release of Huawei Hongmeng 2.0, the company as a core participant is expected to fully benefit.

Guotai Junan Securities raised the target price of Chinasoft International to HK$19.7 and maintained the “overweight” rating.
According to the company's SP301 plan for each business line planning, combined with the 2020 annual report data. We raised our profit forecasts for 2021 and 2022, and added new profit forecasts for 2023. It is estimated that the company's net profit for 2021-2023 will be 12.37 (+1.21), 16.92 (+3.53), and 2.444 billion yuan, and EPS will be 0.43, 0.58, and 0.84 yuan respectively. Under the PE valuation method, the target price is raised to HK$19.70, corresponding to 28 times PE in 2022, and the “overweight” rating is maintained.

Two-wheel drive, double revenue by 2023. According to ChinaSoft International's SP301 plan, the company's total revenue will double in 2023, from 14.1 billion yuan in 2020 to 30 billion yuan, and net profit will exceed 2 billion yuan. Cornerstone business provides customers with technical services and solutions, which is the company's traditional business. In the process of in-depth cooperation with major customers, the company grows together with customers on the one hand and maintains the original proportion in the growing outsourcing market of customers. On the other hand, it seizes the new growth point of customers' demand to occupy more outsourcing shares. Cloud intelligent business is a full-stack cloud business composed of cloud products and cloud services, and the Jiefang number of the software industry ecological platform. The new business line has high gross profit margin and rapid growth. As the proportion of high-margin business continues to increase in the future, the company's profitability may improve.

The company's core competitiveness is the spillover of Huawei's competitiveness. Huawei is currently one of the best managed companies in China. The superiority of Huawei's management is reflected in its "lifeless" management system, which uses the system to manage the enterprise instead of relying on the "rule by man."

Overseas IT service vendors often rise with the best customers . Domestic IT service vendors will also rise with the rise of the best domestic customers.

Huawei's hard to soft, Hongmeng's future development has become an important catalyst. Huawei released version 2.0 of the Hongmeng operating system on the evening of June 2, 2021, marking the acceleration of Huawei's transformation from a "hardware advanced company" to a "software advanced company." The company is a “veteran-level” participant of Huawei Hongmeng, participating in the construction of Hongmeng OS from 0 to 1. We believe that both the company's cornerstone business and cloud intelligence business will benefit from Hongmeng's promotion, and there is huge room for future development.