Company trends
The current situation of the company
The company reported 3QFY22 results: operating income exceeded $20 billion to $20.127 billion, up 16.7% from a year earlier; operating profit was $932 million, up 33% from a year earlier, corresponding to an operating margin of 4.6%; pre-tax profit rose 44.6% year-on-year to $855 million; net profit rose 62% year-on-year to $640 million, with a record high net interest rate of 3.2%.
In terms of business, the revenue of smart device IDG, infrastructure solution ISG and solution service SSG all increased by more than 15% in a single quarter compared with the same period last year, and their operating profit margins all increased compared with the same period last year. ISG business achieved operating profit balance for the first time since its acquisition in 2014; cash flow from operating activities reached US $606 million, and net debt was converted into net cash.
Comment
Smart device business IDG:PC business market share maintained the first place, mobile phone business growth. IDG achieved revenue of US $17.61 billion in a single quarter, + 16% year-on-year, and operating profit of US $1.352 billion, + 21% year-on-year, corresponding to 7.7% operating profit, a record high. 1) PC: thanks to commercial PC (revenue + 25% year-on-year) and high-end models (revenue + 25-50%), PC business achieved revenue of US $14.3 billion, + 14% year-on-year, reaching an all-time high; digital transformation + mixed office mode led to an increase in commercial demand for PC, which is skewed towards portable and high-end models, and we believe that high value-added products are expected to become a long-term profit point for the company. 2) non-PC, such as mobile phones: revenue increased to US $3.29 billion by + 22% year-on-year, mainly due to the growth of mobile phone business in Latin America and North America.
Infrastructure services business ISG: operating profit turned into profit for the first time. 3QFY22 posted revenue of $1.929 billion, + 19% year-on-year, and operating profit of $16.88 million, turning a profit for the first time since it acquired its server business in 2014. Both cloud computing customers and enterprise customers show strong demand growth.
Solution service business SSG: service-oriented, with the fastest growth and the highest operating profit margin. Benefiting from the new IT trend, business recovery, mixed office, 3QFY22 revenue of US $1.5 billion, year-on-year + 25%, operating profit of US $330 million, year-on-year + 44%, corresponding to an operating profit margin of 22.2%.
Valuation and suggestion
Considering that in the first three quarters of FY2022, the company's PC business successively benefited from the consumer PC demand related to telecommuting and entertainment driven by the epidemic, and the mixed office model after the epidemic led to the recovery of commercial PC demand. At the same time, the growth of the mobile phone business in Latin America and North America was higher than expected. We raised FY2022 revenue by 26% to $72 billion. At the same time, the profit margin of each business improved more than expected. We raised FY2022 profit forecast by 117% to $1.974 billion. The first introduction of FY2023 has a profit forecast of $2.567 billion. Maintain the outperform industry rating, and the current share price corresponds to FY2022/23 annual 7.3x/5.6x Pamp E, and we raise our target price by 58% to HK $10.20, corresponding to FY2022 annual 8.5x Pmax E and 18.1% upside space.
Risk.
The shortage of chips affected more than expected; the epidemic affected SSG delivery; and the capital expenditure of cloud manufacturers slowed down.