Introduction to this report:
The full migration of enterprises to the cloud and the rapid growth of the AI market are driving up demand for cloud management services and artificial intelligence products, promoting the accelerated implementation of the company's integrated two-wing model and innovative technology diversified business layout. Performance can be expected to be realized.
Summary:
The first coverage gave an “increase in holdings” rating. The company is a leading technology product channel development and technology solution integration service provider in the Asia-Pacific region, specializing in the distribution of internationally renowned IT products and related accessories. At present, enterprises are fully moving to the cloud and the AI market is growing rapidly, driving up demand for cloud management services and artificial intelligence products. The cloud computing, big data, and artificial intelligence terminal distribution industries are promising in the long term. We expect the EPS for 2019-2021 to be $0.59, $0.68, and $0.81, giving the company 8.7 times PE and 0.12 times PS in 2019, forecasting a stock price of $5.16 based on the prudential downgrading principle, and a reasonable valuation of HK$5.98 per share after adjusting for the three-month average Hong Kong dollar exchange rate, giving it an “increase in holdings” rating.
The distribution of high-quality parts went against the current trend, and innovative technology diversified businesses were successfully deployed. In 2019, the company continued to deepen its distribution business, making full efforts and extending it to industry and enterprise-level IT services to achieve double-digit growth in revenue in the parts sector. Furthermore, the company has further developed a number of innovative technology-related diversified businesses, and has joined forces with AI industry leaders such as iFLYTEK and Enlightenment to help further develop China's AI market. Future performance can be expected.
The integrated two-wing model has been successfully implemented, and the overseas business has contributed to the growth of excellent audio transmission performance. As enterprises continue to move fully to the cloud and the enterprise-level IT service market gradually starts, the company has successfully taken advantage of the momentum to actively expand value-added businesses with high gross profit, further accelerate cloud-based services and re-innovate integrated services. At the same time, the company's overseas business sector continues to gain strength, insists on deepening business relationships with foreign partners, and has won various awards several times. The gross margin is expected to reach a new high in the future.
Catalysts: The process of enterprises going fully to the cloud is accelerating; the scale of the artificial intelligence market is growing rapidly; overseas business is recognized globally; the company will be included in the Hong Kong stock market.
Risk warning: Competition in the ICT distribution industry is intensifying; the growth of the mobile terminal business continues to be under pressure; the progress of enterprises moving fully to the cloud falls short of expectations; further development of overseas markets is blocked.