Performance is growing rapidly. In 2015, the company's revenue was 1,230 million yuan, up 13.3% year on year; Guimu's net profit was 108 million yuan, up 37.7% year on year, and basic earnings per share were 0.39 yuan, up 39.3% year on year. Reasons for the increase in performance: 1) the company's software and system integration business revenue was 1,217 million yuan, an increase of 13.1% over the previous year; 2) asset impairment losses were 7.4324 million yuan, a decrease of 54.9% over the previous year. In 2015, the company promoted a comprehensive transformation of business to cloud services and positioned itself as a smart government solution and service provider.
E-government business continues to grow rapidly. By industry: 1) The e-government business has covered 28 provinces, with a provincial coverage rate of 90%. In 2015, the business's revenue was 508 million yuan, up 53.1% year on year, gross margin was 44.5%, up 6.8 pct year on year; 2) Tobacco informatization has covered 29 provinces, with revenue of 188 million yuan, up 0.8% year on year, gross profit margin 72.5% (up 8.4 pct); 3) revenue from other industries was 521 million yuan, a decrease of 6.7% over the previous year; 4) The revenue of the leasing business was 128.319 million yuan, an increase of 45.5% over the previous year. The rapid development of e-government business has laid a solid foundation for the company to explore the government cloud market.
“Government Cloud+Government Big Data” layout. The company has been deeply involved in e-government for many years, and has stable customer resources in the fields of government affairs, education, police cloud, industry and commerce, civil affairs, food and drug supervision (such as online approval and electronic monitoring covers 28 provinces, nearly 100 cities, and more than 800 district and county customers), has multi-level smart city planning and construction capabilities, and has overall government cloud solutions based on cloud computing and big data, covering Shandong, Jiangxi, Anhui and many other provinces, cities and counties. We believe that by combining its own experience in industry solutions and Inspur Group's hardware and technology support, the company is expected to accelerate the promotion of the public service integration platform and the construction of regional government data resource management platform projects, use the “platform+application” model to provide the Inspur Open Data Platform and the Inspur PaaS platform services, and dig deeper into the value of the Open Government Cloud.
E-commerce is progressing steadily. In October 2015, the company released iMAI3.0, which aims to provide e-commerce public service platforms, integrated service platforms, and e-commerce transaction platforms for customers in various industries and enterprises. It has many features such as open ecology, mobile e-commerce, and traditional e-commerce dual layout. The Inspur e-commerce platform integrates cloud computing, big data, mobile internet and other technologies to jointly provide special applications such as warehousing and logistics services, food traceability, supply chain finance, etc. It has now been promoted by supply and marketing agencies and rural e-commerce, cross-border e-commerce, integrated foreign trade services, etc. Typical projects include the e-commerce platform of Shandong Supply and Marketing Agency, Tianjin North (International) import cross-border e-commerce platform, and Qin Gong International's M2B cross-border e-commerce platform.
Profit forecasts and investment recommendations. We believe that the company has accumulated rich solutions for local e-government and industry e-government, and its ability to expand the government cloud market is quite outstanding. We expect the company's EPS for 2016-2018 to be 0.57/0.81/1.08 yuan, and the target price for 6 months is 45.70 yuan/share, corresponding to the 2016 PE 80 times, maintaining the “buy” rating.
Risk warning. The promotion of government cloud services and e-commerce businesses falls short of anticipated risks, systemic risks.
