Core viewpoints

Investment suggestion: Tianhai acquired Ingram International, the leader in IT product distribution and supply chain integrated services industry, in December 2016, and improved the IT supply chain ecosystem around Ingram International. Inmai International has the industry's leading technology advantage of Yunji Inc products. In the future, HNA Cloud will also combine the advantages of HNA Group's industrial scenarios and promote the integration of AI big data + scenarios based on HNA Cloud ABC (artificial Intelligence, big data, Cloud Computing) technology platform. The main products of Hang Hang Cloud are 4X:

Digital travel, financial technology, new retail, smart logistics, the above sub-sectors of the industry has broad prospects, rapid growth, cloud services have broad application prospects. At present, HNA Cloud has become the strategic core of the group's transformation, and it is expected to continue to increase investment in the future. We expect that the company will achieve net profit of 750 million yuan, 830 million yuan and 930 million yuan respectively from 2017 to 2019, with a corresponding EPS of 0.26,0.29,0.32 yuan respectively. The current share price (7.22yuan / share) corresponds to a PE of 27.8X, 25.2X and 22.5X respectively, covering for the first time and giving [recommended] rating.

Acquisition of Ingram International, a leader in IT product distribution and supply chain integrated services industry: Tianhai invested in December 2016 to acquire Ingram International, a leader in IT product distribution and supply chain integrated services, while spinning off some of its subsidiaries engaged in the shipping business. The company is committed to improving the IT supply chain ecosystem around its subsidiary Inmai International and speeding up the promotion of IT supply chain business and technology investment business around the world. Inmai International as a forerunner in the global IT supply chain industry The business covers IT product distribution and technology solutions (providing IT product solutions for enterprises upstream and downstream of the supply chain), mobile devices and lifecycle services (providing end-to-end lifecycle services for mobile devices and consumer electronic devices), e-commerce supply chain solutions, cloud services (cloud bazaar platform), Internet trading platform, financial services and other segments, the first four sectors are its core business. Ingram Technology has the core technical advantages of warehouse management system (WMS) and fourth-party logistics management capabilities, according to customer needs, efficient and accurate delivery services, and provide customers with personalized, integrated logistics value-added services. Ingram International has set up branches, 154 distribution centers and 28 service centers in 45 countries in North America, Europe, Asia Pacific (including the Middle East and Africa) and Latin America for nearly 40 years, with fast, agile and efficient global service quality.

HNA Cloud combines the advantages of "HNA Group Industrial scene advantages and ABC technology platform", focusing on the layout of Cloud Market and 4xindustrial cloud innovation business, with broad prospects for the industry; among them, HNA Cloud Market is an ecosystem of digital transformation potential customers, cloud service providers and value-added service channels, which simplifies cloud technology acquisition, management and customer support activities. HNA Cloud Market, which has industry-leading technological advantages, gathers domestic and foreign cloud resources (upstream cloud vendors) through one-stop platform, combines various cloud channels (distributors, value-added agents, industry ISV, system integrators), and provides value-added cloud services to "individuals, large and medium-sized enterprises, governments and other end customers". In the future, HNA Cloud will combine the advantages of HNA Group's industrial scenarios, and take HNA Cloud ABC (artificial Intelligence, big data, Cloud Computing) technology platform as the basis, rely on HNA's diversified and international industrial scenarios, and focus on industry cloud according to industry experience and data precipitation, promote the integration of AI big data + scenarios, build an open and intelligent industry digital operation technology platform, and export products and industry solutions. HNA Cloud's main product is 4+X:1) digital travel: to support the digital transformation of the shipping industry by building MTS (human mobile scene travel service model); Air Travel Cloud focuses on the air travel market, with global tourism revenue of US $5.17 trillion (+ 3.6%) and domestic travel revenue of US $4.69 trillion (+ 13.6%) in 2016. The industry is growing rapidly and is expected to accelerate penetration. 2) Financial technology: by focusing on Internet finance, consumer finance and supply finance, provide one-stop financial services to help financial institutions layout Fintech. In 2016, the turnover of domestic online loans reached 2.06 trillion (+ 110%), the scale of consumer credit reached 22.6 trillion, and the financial scale of the supply chain reached 13.08 trillion. HNA Cloud + Financial Technology has a broad application prospect; 3) New Retail: by forming a new digital retail scene centered on consumer experience, it helps physical retail to redefine the consumption scene. SaaS platform fees are usually charged according to the number of stores / counters. At present, there are about 2 million chain stores in China, and the new retail market is huge and growing fast. 4) Intelligent logistics: through the establishment of end-to-end (end to end) one-stop logistics service, to run through the whole process of digital logistics ecosystem. In 2016, the total amount of social logistics in China reached 229.7 trillion, with more than 70 million small and medium-sized enterprises participating, but the logistics efficiency is on the low side, which has become a pain point in the operation of the national economy. Other HNA cloud products include wisdom customer service cloud, wisdom attendance cloud, wisdom security check cloud and so on.

HNA cloud has become the strategic core of the group's transformation, and the three-year development plan is quite bright: at present, HNA cloud has become the strategic core of the group's transformation: 1) strong synergy: HNA cloud fully supports HiAPP and has strong industrial synergy; 2) large R & D investment: HNA Group's annual information investment is close to 2 billion, and HNA Cloud undertakes omni-directional information services such as digitization and solutions. 3) sufficient business support: HNA Group's rich application scenarios in the travel, financial, retail and logistics industries can provide comprehensive support for the industry cloud. In addition, HNA Cloud's development plan for the next three years is quite bright: 1) build core competence and platform output in 2018: quickly build ABC core technology competence and commercialization capability through investment and cooperation; and complete cloud product optimization and platform output in four key industries; 2) enrich product line and layout internationalization in 2019: complete the improvement of more products such as educational cloud, medical cloud, intelligent cloud, Internet of things and so on. Relying on the pull of overseas industrial scenarios, complete the global landing of HNA Cloud (Voyage Cloud + Swissport+Hilton, Retail Cloud + Dufry), and strengthen and enhance operational capabilities; 3) in 2020, overall lead, layout of next-generation technology: achieve industry-wide coverage, and occupy a leading position in many segments of the industry; complete the integration of technological capabilities, achieve comprehensive technology autonomy; and layout the next generation of industrial technology.

Risk reveals: M & An integration is less than expected risk; cloud service performance growth is not as fast as expected risk; industry + cloud business product landing integration failure risk.