The company's three new business revenue continues to maintain rapid growth. The company released its mid-2022 results, with revenue of 3.109 billion yuan in the first half of the year, an increase of 14.5% over the same period last year. Among them, three new businesses continued to maintain rapid growth, with a total revenue of 1.004 billion yuan, an increase of 81.4% over the same period last year, and were the main contributors to the company's double-digit growth. By 2022 Q2, the proportion of the company's three new businesses in total revenue has increased to 32%. In the first half of 2022, the company's new orders increased by 30% year-on-year, of which three new business new orders increased by 60% year-on-year, laying a solid foundation for maintaining steady growth throughout the year.

Due to the repeated outbreaks in many places, the delivery efficiency of some projects has declined, and the acceptance of some projects has been delayed, especially the traditional business (BSS business and the sale of third-party software and hardware, system integration services and enterprise training services), resulting in a slight decline in the growth rate of traditional business revenue by 2.6% to 2.106 billion yuan, as the company's net profit is mainly generated by traditional businesses such as BSS. As a result, the company's profits are under short-term pressure. In the first half of 2022, the company achieved net profit of 189 million, down 32.4% from the same period last year, with a net profit margin of 6.08%. If the impact of equity incentive fees is excluded, it is 262 million, down 15.7% from the same period last year, and the net interest rate is 8.4%. We believe that with the reduction of the impact of the epidemic in the second half of the year, projects with delayed delivery and acceptance will resume quickly, and for the whole year, net profit can still be maintained in a reasonable growth range, and net profit margin will remain above double digits (about 10%).

In the first half of 2022, the company achieved a gross profit of about 1.054 billion yuan, an increase of 5.6 percent over the same period last year, and a gross profit margin of 33.9 percent, down 2.8 percent from the same period last year, also affected by the epidemic in the first half of the year. We expect the company's overall gross margin to decline this year and remain in the range of 36% to 38% as a whole.

DSaaS business line set up a subsidiary, the company launched a comprehensive new energy solution, the three new businesses continue to expand at a high speed. In terms of DSaaS business, revenue reached 484 million yuan in the first half of 2022, an increase of 56.7% over the same period last year, accounting for 15.6% of the revenue ratio. At present, the company has completed the integration of DSaaS product line and iResearch Consulting, including the comprehensive integration of team, product and service system and brand, and established an independent subsidiary of iResearch. In the future, the main business lines will focus on intelligent decision-making and intelligent operation, with room for imagination. We continue to be optimistic about the company's great potential in this field, the safe and effective use of full-dimensional data of the three major operators and the omni-directional integration of mathematical intelligence consulting and planning with iResearch Consulting, it will effectively support the strong cash realization ability of the company's digital intelligence operation. As of the first half of 2022, non-telecom operators accounted for 36% of the company's DSaaS revenue, while the revenue share of the results-based payment model has increased to 26%, nearly 30%, fully reflecting the strong driving force of the company's digital intelligence SaaS operation. We expect that with the completion of the integration work and the establishment of independent companies, DSaaS business will be accelerated in all segments of the industry except the telecom operator market, and the industry territory will be further extended to retail, Internet and other consumer TMT areas.

Vertical industries and enterprises on the cloud, benefiting from the market expansion of focused industries such as energy, government affairs, postal services, and cloud business cooperation, vertical industries and enterprises continue to grow on a large scale, with revenue of about 271 million yuan in the first half of 2022 up 140.3% over the same period last year, accounting for 8.7%. In the energy industry, the company's 5G private network solution is in a leading position to achieve multi-point replication in nuclear power, wind power, thermal power and other markets. In addition, the company has recently launched a comprehensive energy solution, which has been piloted in Hainan, which focuses on the field of IDC to help IDC or owners introduce new energy power, solve the stability of power grid and the daily maintenance of photovoltaic panels, and can reduce the electricity cost by as much as 50%. The pilot landing of the solution indicates that the company begins to expand into the new energy field of the energy industry, with a broad space for development; in the field of government affairs, it continues to promote key projects with big data bureaus and the digital construction of smart cities, and in transportation, finance, postal and other key industries have landed a number of large-scale projects of big data and intelligent control platform. At present, the vertical industry is mainly based on the project system, but there is room for digital intelligence operation, such as new energy management and smart city / digital twin operation, to realize the benign development path from project to operation.

In terms of OSS business, relying on the technical leadership of 5G network intelligent products, the company continues to expand the market of communication operators, and OSS business maintains a trend of rapid development. In the first half of 2022, the company achieved revenue of 248 million yuan, an increase of 88.7% over the same period last year, accounting for 8.0%. At present, the company's market share is more than 10%, and the share of other manufacturers is similar, and there is no absolute leading enterprise yet. We expect the company's market share in OSS to reach more than 30% in the future, on a par with its BSS business.

Investment advice. According to the valuation of comparable companies by business lines, the average PE of comprehensive IT manufacturers involved in telecommunications services is 24 times in 2022; in the field of SaaS, the average PS of American SaaS manufacturers in 2022 is 12 times, which is much higher than the average PS of domestic SaaS manufacturers (4 times); in the field of MSP, several typical American MSP manufacturers are selected, with an average PS of 5 times in 2022; and an average PS of 6 times in OSS field in 2022.

Valuation logic

We forecast that the company's operating income from 2022 to 2024 will be 79.41 (+ 2.48%) / 90.28 (+ 3.63%) / 101.99 (+ 5.84%) billion yuan respectively. The net profit was 8.21 (- 9.18%) / 10.07 (- 1.18%) / 11.37 (- 2.99%) billion yuan respectively, and the CAGR of net profit in the period 2021-2024 was 13%. We use the method of valuation and summation of each business line, among which, because the company's net profit is mainly generated by BSS business, BSS business uses PE valuation method, and other business lines use PS valuation method. In terms of BSS business, with reference to China Unicom Hong Kong stocks (0762.HK), the 2022PE forecast is that 5.9 Magi 21-23 net profit CAGR is 13.3%, its PEG is 0.44, China Telecom Corporation Hong Kong stocks (0728.HK), 2022PE forecast value is 7.4 Magi 21-23 net profit CAGR is 15.0% peg is 0.49. Considering the slow growth of BSS revenue of AsiaInfo Technology, as a traditional telecom business, we give 5 times PE (unadjusted) (PEG is about 0.38). In terms of DSaaS business, with reference to comparable SaaS (Chinese company), considering its revenue scale, growth rate and its uniqueness, and very optimistic about its long-term development after merging with iResearch Consulting into a subsidiary, it will be given 5 times PS (unadjusted) in 2022 (higher than the average of domestic SaaS manufacturers). In terms of vertical industry and enterprise cloud (MSP) business, with reference to comparable companies, considering its industry position and growth level, as well as the market prospect of the company's newly expanded integrated energy management solution in the field of IDC new energy and the core competitiveness of 5G private network, we will give 4x PS (+ 33.33%) in 2022. In terms of OSS business, with reference to comparable companies, taking into account its industry leadership and growth level, we will give 6 times PS (- 14.29%) in 2022.

If the four business lines are added together, the target market capitalization is 167.90 (+ 3.58%) billion RMB, calculated on the basis of 928.8 million common shares, the target price is 18.08 (+ 3.43%) RMB per share (corresponding to 21.02 (- 2.82%) Hong Kong dollars per share) (RMB Hong Kong dollar exchange rate: 0.8599 (exchange rate difference + 6.40%), maintaining the "better than the market" rating.

Risk hint. The decline of the company's BSS business affects profitability, the growth rate of three new businesses is lower than expected, macro market risk increases, affecting the overall valuation level of the company's related business areas and other negative factors.