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Tuesday, 11/16/2021 5:41:25 AM

Tuesday, November 16, 2021 5:41:25 AM

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Kaiyuan Securities: First "Buy" rating given to China Software International (00354) is expected to benefit from Hongmeng Ecosystem.


November 15, 2021 15:43 Zhitong Finance APP

Zhitong Finance APP was informed that Kaiyuan Securities released a research report and first assigned China Software International (00354) a "Buy" rating. 0.71 yuan, corresponding to the current stock price PE is 26.4/19.9/15.2 times respectively.

The main views of Kaiyuan Securities are as follows:
Domestic IT service leader.
The company is the leading domestic IT service provider and Huawei’s largest IT outsourcing service provider in China. Huawei contributes more than 50% of the company’s revenue. The company is deeply involved in the ecological construction of Hongmeng Zhilian. With the acceleration of Hongmeng ecology, the company is expected to continue to benefit.

Smart cloud starts the second growth curve, and aims to enter the top 50 of global IT services in 2023. In 2020, the company will release its 30th anniversary strategic plan SP301, target revenue of 30 billion yuan in 2023, and enter the top 50 of Gartner's global IT service market.
1) H1 cornerstone business:
Technical services and solutions are the cornerstone business of the company, contributing major revenue and profits. IResearch predicts that China's IT service market will reach 1.2 trillion yuan in 2023, with a vast space. In the future, the company will focus on large enterprises and cultivate billion-dollar customers, while continuing to promote service productization to build differentiated competitive advantages.

2) H2 growth business:
In 2019, the company started its cloudification transformation, positioning itself as the largest independent third-party cloud service provider. In the context of digital transformation, downstream demand is strong, and the cloud professional service market continues to grow rapidly. The company continues to make breakthroughs in cloud development and cloud migration. In the future, Cloud Intelligence will open the second growth curve, with the goal of accounting for 40% of revenue in 2023 (25.5% in 2021H1).

Huawei's highest-level partners are expected to benefit from the Hongmeng ecosystem.
1) The company is the highest-level partner of Huawei:
The company and Huawei started cooperation in 2009. From the initial software outsourcing service provider, the company has developed into the highest-level partner. The company accounts for 50%-60% of Huawei's outsourcing market share and is Huawei's largest IT outsourcing service provider in China.

2) Deeply participate in the ecological construction of Hongmeng Zhilian:
Hongmeng OS involves a large number of module development and applications. Based on the consideration of labor cost, the development of middleware and some modules will be handed over to partners. In addition, the company is the earliest service provider of Huawei's HiLink ecosystem and has deeply participated in the construction of the Hongmeng Zhilian ecosystem. Currently, it has listed a variety of modules, development boards, and solution boards, helping more than 70 equipment vendors to access the Huawei ecosystem, with more than 100 SKUs. indivual. With the acceleration of the Hongmeng ecology, the shipment of IoT devices connected to Hongmeng will accelerate, and the company is expected to continue to benefit.