Main points of investment

Event: the company announced that the Management Committee of Jiangxi Fuzhou High-tech Industrial Development Zone, Tianjin Zhuolang Science and Technology and Tianjin Songjiang signed the Strategic Cooperation Framework Agreement on July 22, 2016 in Fuzhou City, Jiangxi Province. According to the agreement, the designated unit of the management committee of Fuzhou High-tech Zone, Zhuolang Technology and Tianjin Songjiang jointly funded the establishment of a project company in Fuzhou (Tianjin Songjiang Holdings), which is responsible for the specific implementation of cooperation. The specific cooperation contents include: cloud computing data center construction, cloud computing data center operation, supporting park construction and operation, new generation information technology industry environment construction, and promote the healthy development of Fuzhou smart city construction. The project covers an area of 930mu with a total planned investment of 4.5 billion yuan.

Comments:

This cooperation opens the way for the company to cooperate with the local government, and the smart city construction has expanded in different places for the first time. The partner of this strategic cooperation is the Management Committee of Jiangxi Fuzhou High-tech Industrial Development Zone, which is an important government agency in Fuzhou; this cooperation is the practical need of the Fuzhou High-tech Zone Management Committee for overall planning and construction of cloud computing and big data infrastructure, promoting Fuzhou's economic transformation and upgrading and improving quality and efficiency, and Fuzhou Municipal Government is expected to give important support to the company. At the same time, this cooperation is the company's first remote expansion in the smart city field after the "Smart Nankai" project, and an important step for the company to firmly implement its diversified development strategy. we believe that it is expected to open up a replicable way for the company to cooperate with local governments to build big data and Smart City projects, thus bringing new profit growth points for the company.

Give full play to Zhuolang's technological advantages to lay the foundation for the company's expansion to other cities. This cooperation mainly includes five aspects: cloud computing data center construction, cloud computing data center operation, supporting park construction and operation, new generation information technology industry environment construction, and promoting the healthy development of Fuzhou smart city construction. We believe that the content of this cooperation is fully matched with the technical strength of Zhuolang Science and Technology, which is conducive to giving full play to Zhuolang's technological advantages and accumulating useful experience.

This cooperation will contribute new profit growth points for the company. The cooperation project covers an area of 930mu, with a total investment of 4.5 billion yuan, including the construction of data centers for 4000 standard cabinets and professional services such as IDC basic services, cloud computing and big data. With reference to companies such as Sinnet, the leading target of the domestic IDC industry, we estimate that 4000 cabinets are expected to contribute about 60 million in net profit each year, and the company's profitability is expected to be improved.

Investment suggestion: strategic cooperation opens the road of cooperation between companies and local governments, smart city construction to achieve remote expansion, broad prospects for future development. We are optimistic about the diversified layout of the company in the areas of smart city, hospital resources and financial investment. Considering the passage of additional offerings, it is estimated that the EPS in 2016-2017 will be 0.11,0.31 yuan respectively, corresponding to 61.1,21.7 times of PE, maintaining the "overweight" rating.

Risk tip: property sales fell sharply.