Main points of investment

1. Data center business accumulates abruptly to promote steady growth of business performance. The company's revenue in 2016 increased by 12.10% compared with the same period last year, mainly due to the accelerated growth of data center construction and operation service business. Gross profit margin rose 2.2 percentage points year-on-year to 24.41%, mainly due to lower procurement costs and an increase in software and technical service fees as a share of income. The company's sales expense rate decreased by 0.28% compared with the same period last year, and the financial expense rate remained stable. The rate of management expenses rose 1.99 percentage points year-on-year, mainly due to a 58.16% year-on-year increase in R & D investment.

In the long run, increasing R & D investment will help the company to enhance its core competitiveness and maintain its competitive advantage.

two。 With the landing of the strategy of "three clouds, three + and three platforms", the cloud business is expected to comply with the industry and technology trends. The company has released "three clouds, three +, three platforms" combined with its own advantages.

Business development strategy, the current strategy has been gradually landed. The company established the cloud video business department and launched the cloud video independent brand "True Huitong", which has a broad market prospect; the ability to acquire the overall solution of the cloud computing and cloud computer room business is expected to be greatly improved. In addition, the company has made breakthroughs in big data business, Internet of things business and military cloud simulation business. We believe that cloud video products as well as cloud computing and cloud computer room business are expected to become a new growth point of the company, driving a substantial increase in performance.

3. Investment advice:

Considering the accelerated development of the company's data center business and the possible performance breakthroughs in cloud video products, cloud computing and cloud computer room business, we expect EPS to be 1.04,1.25,1.47 yuan in 2017-2019, with recommended ratings for PE63X, 53x and 45x.

4. Risk Tips:

Policy risk, cloud video products and cloud computing, cloud computer room business promotion is not as expected risk.