Weishijiajie's net shareholders' net profit for the first half of 2019 reached HK$392 million, an increase of 8.3% over the previous year. Total revenue increased 7.5% year over year to HK$30,032 million, with mobile devices/accessories/cloud computing and big data analytics/network and information security businesses falling 4.4% yoy, up 26.4% /up 11.1% /up 15.5%, respectively. Gross margin increased 0.3 percentage points to 4.8% year over year, benefiting from increased IT service business contribution. Shareholders' net profit growth was lower than our forecast, mainly because the mobile terminal business fell short of expectations in the context of the Sino-US trade war.

We expect the company's cloud computing and big data analysis business to continue to achieve steady growth in the future. The company strengthened its cooperation with Alibaba Cloud and relied on the company's extensive channel-layout and expertise to help its products expand into China's low-tier cities.

Additionally, in the first half of 2019, the company signed contracts with more companies to develop its cloud computing, including operations and maintenance.

The investment rating was maintained at “buy” but the target price was lowered to HK$5.22. The new target price is equivalent to 9.0 times/7.2 times/6.0 times the price-earnings ratio for 2019/2020/2021, respectively. Key risks include increased competition in the IT services industry and weaker than expected global economic performance.