Event
1QFY23 performance: revenue / net profit increased 0.2% / 11% compared with the same period last year, revenue is in line with market expectations, and net profit is slightly higher than market expectations.
On August 10, the company announced 1QFY23 results that revenue rose 0.2 per cent year-on-year to $17 billion, excluding exchange rate fluctuations, up 5 per cent, in line with market expectations; net profit rose 11 per cent year-on-year to $516 million, higher than market expectations of $498 million, and net profit adjusted for non-Hong Kong financial reporting standards was $556 million, up 35 per cent from a year earlier.
Brief comment
1. The company's revenue and profits are growing steadily, and the three major businesses are expected to create the second growth curve for the company to achieve nine consecutive quarters of revenue and profit growth. According to business groups, ISG/SSG revenue in this quarter increased by 14% compared with the same period last year.
Looking forward to the whole year, we believe that PC business is dragged down by weak demand, shipments and revenue have declined, and it is expected to maintain the basic market of the main business by increasing market share and the share of high-end products. The results of the transformation of the three major businesses such as smartphones, smart infrastructure and solution services are gradually emerging, and the revenue share is increased to 37%, which is expected to create the company's second growth curve.
2. IDG Group: PC business is under pressure, mobile phone business performance 1QFY23 IDG business turnover fell 2.7% to 14.3 billion US dollars, of which non-PC business revenue accounted for 22%. Global PC shipments (desktops + laptops + workstations) fell 15 per cent year-on-year to 70.2 million units this quarter, the lowest level since COVID-19 's outbreak, according to Canalys. The company shipped 17.5 million PC units in the quarter, down 12.1% from a year earlier, with a global market share of 24.6% (up 0.8% from a year earlier and 0.9% from a month earlier).
According to IDC, the company shipped 12.4 million smartphones in the quarter, up 0.3% from a year earlier, with a market share of 4.3% (up 0.4% from a year earlier and 0.7% from a month earlier). The company's mobile business revenue grew 21% year-on-year this quarter, maintaining growth not only in the traditional North American and Latin American markets, but also in Europe, Africa, the Middle East and Asia-Pacific markets by 24% and 56% respectively. Looking forward to the whole year, PC shipments are expected to decline by 10-13%. The company's PC business is under pressure. the rapid growth of mobile phone business and the increase in the proportion of PC high-end products are expected to ensure the stability of IDG Group's revenue and profit.
3. ISG Group: turnover has reached a new high and profits have improved steadily
1QFY23 ISG's revenue rose 14 per cent year-on-year to $210 million, with an operating margin of 0.5 per cent (1.1 percentage points higher than a year earlier, unchanged from a month earlier).
The turnover of the company's cloud IT infrastructure, server and storage, and edge computing all reached record highs, and the growth rate exceeded the average market growth rate. As an end-to-end infrastructure solution provider, the company continues to invest in a comprehensive portfolio and innovative technologies, focusing on edge computing and services. Looking forward to the whole year, ISG Group benefits from the rapid expansion of the server and edge computing market and will maintain a higher growth rate than the market while balancing scale and profitability.
4. SSG Group: strong growth and high profit margin
1QFY23 SSG's business revenue was $1.46 billion, up 23% from the same period last year, its operating profit was up 25% from the same period last year, and its operating profit margin reached 22.6%, significantly higher than that of IDG and ISG. SSG Group extends its TruScale portfolio to a wide range of digital office solutions and introduces hybrid cloud management solutions. Looking forward to the whole year, SSG Group and PCCW are expected to cooperate with PCCW to further expand the market, and the Group's business will maintain rapid growth.
5. Profit forecast and investment suggestions
The company's performance is in line with market expectations, PC business is under short-term pressure, the three major businesses create the company's second growth curve, the share of revenue continues to increase, and the goal of doubling the three-year net profit margin and R & D investment is close to being achieved. We maintain our FY23-FY25 net profit forecast of 2.41 billion / 263, unchanged at $2.96 billion and maintain our Buy rating. With reference to the valuation level of the global comparable hardware companies Dell and Hewlett-Packard 5.5x PE in 2022 and the second growth curve brought about by the company's three major businesses, we give the company FY2023 6xPE with a target price of HK $9.4.
Risk tips: the risk of deterioration of the global macro environment, the risk of further decline in PC demand, and the risk that the company's new business development is not as expected.