Event: the company announced its 2021 results, with revenue of 6.9 billion yuan, an increase of 14.5% over the same period last year, of which the traditional BSS business was 5.33 billion yuan, up 1.7% from the same period last year, accounting for 77% of the revenue. The combined revenue of the three new businesses (OSS, vertical industry / enterprise cloud, digital operation DSaaS) increased by 101% to 1.57 billion yuan compared with the same period last year, and the proportion of revenue expanded to 23%. The gross profit margin was 38.4 per cent the same as that in 2020, with a net profit of 786 million yuan, an increase of 18.7 per cent over the same period last year, corresponding to a net profit rate of 11.3 per cent.

The return to growth of traditional business BSS and the rapid expansion of new business led to double-digit growth in overall performance: revenue from three new businesses in 21 years was 1.57 billion yuan, of which revenue from OSS was 410 million yuan, a rapid increase of 67% over the same period last year; revenue from vertical industries / enterprises on the cloud was 430 million yuan, an increase of 136% over the same period last year Income from DSaaS was 730 million yuan, a rapid increase of 108% over the same period last year, accounting for 11% of revenue, up from 6% in 2020. Based on the improvement ceiling of traditional BSS and OSS market space and company share, we expect the company's carrier business to maintain low and steady single-digit growth. In the future, relying on vertical industry / enterprise cloud and DSaaS digital operation to expand non-operator market customers in parallel is expected to drive the overall performance to achieve sustainable double-digit growth. We expect revenue of CAGR 12% in 21-25.

Benefit from the development dividend of the industry, tied to the joint expansion of operators to open room for sustainable growth in the future: 1) DSaaS digital operation, promoting results-based payment, split settlement, subscription and other innovative business models; 2) vertical industry / enterprise cloud, the company's continuous layout of government affairs, finance, postal, transportation, energy and other five strategies focus on vertical industries. Benefiting from the rapid growth of China's cloud computing industry as a whole and the development dividend of the digital economy, the company takes its own vertical industry customized applications, cloud value operation and R & D capabilities as its foothold, and binds the operator DICT strategy to jointly expand. Based on the fact that China Mobile's in-depth strategic partnership occupies the advantage of underlying data resources, the company's cloud business is expected to achieve rapid growth. We estimate that the revenue from DSaaS business and vertical industry / enterprise cloud business will be 31% and 51% respectively, and the share of revenue in 25 years is expected to increase to 20% and 21% respectively. In terms of ecological construction, the company has completed the acquisition of iResearch Consulting, which will empower the company's digital operation and digital intelligence transformation business.

Profit forecast, valuation and rating: in view of the acceleration of the transformation process of the company's cloud business, the 22-23 return net profit forecast is raised by 2.7% to 8.69 / 970 million RMB, and the 2024 return net profit is forecast to be 1.07 billion RMB. The corresponding year-on-year growth rate is 11%, 12% and 11% respectively. The company's latest price of HK $13.2 corresponds to 11 times PE in 22 years, with a certain margin of valuation safety, steady growth and a stable dividend mechanism. In the future, switching to the PS valuation method after the volume of DSaaS business is expanded is expected to open the valuation space, maintain the target price of HK $14.8 (corresponding to 13 times PE in 22 years), and maintain the "buy" rating.

Risk hint: operator IT investment decline; new business transformation is not as expected.