Chinasoft International Ltd (CFTLF)

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Industrial Securities: Maintain China Software International (00354) "Buy" with a target price of HK$9.47

Source
https://finance.sina.com.cn/stock/hkstock/hkgg/2022-04-19/doc-imcwiwst2753352.shtml

April 19, 2022 15:29 Zhitong Financial Network

Industrial Securities released a research report saying that it maintains the "buy" rating of China Software International (00354), and expects 2022-24 revenue to be 228/292/34.2 billion yuan and net profit attributable to the parent 13/14/1.5 billion yuan, with reference to the valuation of comparable companies, 16.5 times PE valuation in 2022, target price of 9.47 Hong Kong dollars. The bank believes that with the improvement of the epidemic and the gradual release of the budget of major customers, the company is expected to increase the growth rate with the help of the diversified customer system represented by Huawei.

Event:
The company spent HK$29.412 million to repurchase 5 million shares on April 11, 2022 at a repurchase price of HK$5.72-6 per share, and repurchased 5 million shares on April 12. The total number of shares repurchased twice 0.32% of the issued shares, and the company will conduct irregular repurchase before May 18, with a total cap of HK$1 billion, which reflects the company's good confidence in the existing fundamentals and recognition of the company's value.

The main views of Industrial Securities are as follows:
The revenue growth rate has reached a new high, and the investment has been increased to enhance the dominant position.
Thanks to the steady growth of the core key customer business and the rapid development of the cloud intelligence business, the company's revenue in 2021 will be 18.4 billion yuan (YoY+30%). Affected by increased strategic investment and new business investment, the company's gross profit was 4.9 billion yuan (YoY+19%) and gross profit margin was 26.7% (YoY-2.6pcts). In 2021, the marketing expense rate, administrative expense rate, and R&D expense rate are 5.1%, 9.5%, and 6.8%, respectively, and the overall expense structure is relatively stable. The net profit was 1.14 billion yuan (YoY+20%), and the net profit margin was 6.2% (YoY-0.5pct).

The large customer base has steadily expanded, and the cloud intelligence business has grown rapidly.
On the one hand, the company deepens the cooperation with the existing large customers, and on the other hand, it continues to actively develop the middle and high-end customer groups: in 2021, the top five customers will contribute 71.3% of the company's service revenue. At the same time, the company vigorously develops the cloud intelligence business, strengthens the construction of the Jiefanghao industrial Internet platform, and provides full-stack cloud services for government and enterprise customers. In addition, due to the continued strong demand for cloud migration from domestic enterprises in recent years, the company's cloud intelligence business revenue will reach 5.31 billion in 2021. Yuan, an increase of 62% year-on-year, and revenue accounted for 28.8% (YoY+5.6pcts). According to IDC data, Chinasoft International ranks second in the cloud management service market.