Main points of investment
The company is a leading service provider in the field of telecom operation support system. The company mainly provides comprehensive services such as customer relationship management, big data billing and mobile Internet service guarantee for telecom and radio and television network operators. After 20 years of development, the company has a full set of strength from planning to self-research and development, and has established a long-term and stable business relationship with the three major telecom operators, and is the second largest service provider of China Mobile Limited's operation support business.
The telecom operation support industry is in a stable investment rising cycle. According to the CCID forecast, the annualized investment growth rate of the three major telecom operators in the field of telecom operation support is expected to maintain an annualized growth rate of about 10% in the medium term, and the investment scale is expected to reach 22.27 billion yuan by 2018. Among them, China Mobile Limited accounts for nearly 50%, which is the main driving force. We judge that with the popularity of 4G and the approach of 5G upgrade, the industry is expected to obtain new incremental investment demand.
Competition pattern: the company ranks the first group, and the software business has a clear relative advantage. The company has a stable cooperative relationship with the three major operators for more than 10 years, achieving national regional business coverage; compared with comparable listed companies, the company continues to take the lead in the scale of software + technical services business, and the company takes the software business as the core, accounting for more than 95%. In the field of telecom operation support, where the competition pattern is relatively stable, the company ranks first.
Cloud investment in technology and business is expected to drive the growth of the company. The company has continued to increase investment in R & D and cloud business over the past two years, and it is expected that the all-cloud BOSS and mobile Internet big data cloud projects with a total investment of 320 million by 2018 will generate large-scale income. 2016H1, the proportion of the company's cloud business and mobile business revenue has increased steadily, accounting for nearly 30% of the company's cloud business and mobile business. The proportion of new business is expected to continue to increase in 2017-18.
Risk factors. The risk of customers is too concentrated; the risk of decline of investment in telecommunications; and the risk of cloud business development is not as expected.
Profit forecast. The growth rate of investment in the company's industry is stable. After about two years of continuous investment, the company is likely to accelerate its profit trend in the next two years as the capability of cloud business services increases. We give the company a profit forecast of 0.83 pounds 1.00 pounds for 2016-18. With reference to the 33x valuation of the comparable company in the computer sector, combined with the company's competitive position in the telecom operation support sector and the company's pure software business structure, the target price is 35 yuan, corresponding to the 2016-18 PE 42max 35max 29X.
