I. Overview of events
Recently, the company held a press conference with the theme of "the future, should be born in the cloud" in Shanghai, and launched a new cloud service platform, HNA Cloud Fair.
II. Analysis and judgment
One-stop service, cost performance and global resources have advantages in the domestic public cloud market.
The company, an important platform in layout technology under HNA, acquired IMI, the world's largest IT distributor and Fortune 500 company, for about $6 billion in 2016, and completed the deal on December 7 of that year. Compared with its competitors, Ingram has a highly automated technology platform and established its Ingram Cloud Computing Technology subsidiary in 2013, with a team of more than 1200 experts. Cloud bazaar products have landed in 44 countries and regions, with an annual income of nearly 400 million US dollars.
Competitive manufacturers in the domestic public cloud market include BABA, Tencent, Huawei and so on. Overseas cloud products account for a relatively small domestic share and have more room for improvement. The company's Yunji Inc products are expected to maintain certain advantages compared with domestic leading manufacturers in terms of one-stop services (hardware, software, financial services, logistics, etc.), performance-to-price ratio and global resources.
China's public cloud market is in a rising period of rapid growth. According to the Gartner report, the global public cloud market is expected to reach US $195 billion in 2020, with a compound annual growth rate of 19%. IDC data further show that the size of China's public cloud market is about 15 billion yuan in 2016 and is expected to reach 35 billion yuan in 2020, with a compound annual growth rate of 24 percent, higher than the global growth rate. With the help of HNA channels, Ingram Cloud Technology entered China in the form of "Yunji Inc City", which is a breakthrough for overseas cloud products in the domestic market, and is expected to cut the growing market cake from competitors.
HNA Cloud relies on big data of HNA Group, and has obvious cloud advantages in vertical industry.
Centering on its endogenous advantages, the company has launched four cloud products: digital voyage, financial technology, new retail and smart logistics, and participated in C-end products such as tourism platform HiApp in the way of technical support.
Data is an important prerequisite for cloud services. HNA Group has a wide range of shipping, hotel, logistics, financial services and other assets, which provides sufficient data resources for the company to build related cloud products. At the same time, deep ploughing in sub-areas such as air travel will help the company to understand and explore customer needs and build a moat for Internet enterprises to enter this field. Take OTA as an example, including Trip.com, Feichangzun and other third-party service providers rely on HNA's data interface to provide services. Under the general trend of data access within the group, the company's cloud services are expected to gain exclusive advantages in terms of data scale and subdivision of data types.
It is optimistic that the upstream cost control will help the profit transformation of the hundreds of billions of revenue scale.
With the help of Ingram's distribution business, the company achieved revenue of 223.9 billion yuan and deducted non-net profit of 540 million yuan in the first three quarters of 2017, an increase of 14 times and 7 times respectively compared with the same period last year. The gross profit margin of the IT distribution market is low, with Ingram's net profit margin of about 0.5 per cent based on 2015 earnings data, which still has room for improvement compared with competitors such as TechData. With the help of HNA resources in channel, logistics and other aspects of cost control, as well as the trend of price reduction of upstream products in the industry (such as memory, etc.) continues, the company's profit conversion rate is expected to increase.
Third, profit forecast and investment suggestions
From 2017 to 2019, the company's EPS is expected to be 0.25,0.31 and 0.36 yuan respectively, and the current share price corresponds to PE of 30X, 24X and 21X respectively. Based on the reliability of the industry cloud business scenario and Ingram's position in the industry, we are optimistic about the expected success of the company's transformation, valuing the company at 35-40 times, and maintaining a "highly recommended" rating at a reasonable price of 8.75-10.0 yuan in the next six months.
IV. Risk hints
The progress of cloud business landing is not as expected; the bargaining power is declining; the impact of exchange rate changes.
