Performance review
1H22 performance is in line with our expectations
Sinorama announced its mid-2022 report: the company achieved operating income of 3.602 billion yuan, down 8.49% from the same period last year; net profit from home was 333 million yuan, down 25.49% from the same period last year; and net profit from non-return was 306 million yuan, down 31.43% from the same period last year, which was basically in line with our previous expectations. Corresponding to the single quarter of 2Q22, the company achieved operating income of 1.769 billion yuan, down 10.47% from the same period last year and 3.46% from the previous year; the net profit from the parent was 140 million yuan, down 37.37% from the same period last year and 27.55% from the previous year.
In terms of business, 1H22 achieved business income of 1.07 billion yuan in IDC, an increase of 9.68% over the same period last year, while cloud computing achieved 2.488 billion yuan in revenue, down 14.84% from the same period last year.
Trend of development
The company's 1H22 operation is under pressure, which we think is mainly due to: 1) the construction progress of some data centers and the speed of customers on the shelves have been slowed down by the epidemic, and the business income of the data center has been dragged down by the progress of shelves; 2) affected by the epidemic, real estate regulation, the double reduction of the education industry and the strengthening supervision of the Internet industry, the income of unparalleled technology business is under pressure. 3) Fangshan Phase 1 and Phase 2, Yanjiao Phase 3 and Phase 4, Tianjin Baodi Phase 1 and other projects under construction have been newly consolidated, and depreciation amortization has increased; 4) the price of industrial electricity in Beijing, Tianjin, Shanghai, Yanjiao and other places has increased by 10-15%. This has led to a rise in the company's total electricity cost; 5) the company's US dollar loan incurred an exchange loss of 33.4586 million yuan.
The rhythm of customers on the shelves is expected to gradually recover with the relief of the epidemic, and Tianjin Baodi Phase II project is planned to enhance business competitiveness. Q2 was affected by the epidemic, the construction of data centers in Fangshan Phase II, Jiading Phase II and Yanjiao Phase III and Phase IV was delayed, and the progress of data center modules that had been put into production slowed down. We expect that as the epidemic alleviates, the progress of project construction and customers on the shelves is expected to resume gradually. 1H22 plans to build the second phase of Baodi Cloud Computing Base in Baodi area of Tianjin, which is expected to be equipped with 10000 5KW 2N standard machines. As of 1H22, the company has put into production a total of about 47,000 cabinets, and it is expected that the total number of cabinets after delivery will exceed 110,000. We believe that the construction of Tianjin Baodi Phase II is expected to enhance the competitiveness of the company's IDC business in the Beijing-Tianjin-Hebei region.
Cooperate with Advantech Technology to pay attention to the development of new customers. The Advantech industrial cloud operation project, which the company cooperated with Advantech Technology in 2021, completed the platform construction and officially provided services in March 2022, and reached a full business cooperation with Xu Fuji in August 2022. We recommend that investors pay attention to the marginal incremental contribution of Advantech's industrial cloud business to the company's performance.
Profit forecast and valuation
Due to the pressure on the unparalleled technology business, we cut our net profit by 16% in 2022 and 2023 by 15% to 806 million yuan and 931 million yuan. The current share price corresponds to 20.8 times 2022 earnings and 18.0 times 2023 earnings. Maintain the outperform industry rating and lower the target price by 16% to 10.31 yuan based on 23.0 times 2022 earnings, corresponding to 23.0 times 2022 earnings and 19.9 times 2023 earnings, which has 11% upside compared to the current share price.
Risk.
The price competition of IDC is fierce, and the progress of the new cabinets of the company's customers is not as expected.