It is proposed to acquire GS, and iron and steel enterprises will enter the IDC industry. The company plans to buy 100 per cent of Suzhou Qingfeng through a non-public offering and cash payment. Suzhou Qingfeng currently holds 51 per cent of EJL, while Shagang Group has transferred 24.01 per cent of GS through indirect wholly-owned subsidiary TEL and 24.99 per cent of GS through subsidiary Strategic IDC.
IDC industry has broad prospects for development, and large-scale has become a trend. In recent years, the cloud computing industry has shown a trend of rapid development, and the scale of the global and Chinese cloud computing market has increased rapidly. Benefiting from the rapid development of the demand side, the scale of the IDC market is also expanding rapidly. By the third quarter of 2019, the number of super-large data centers had reached 504, triple the number in 2013, according to Synergy Research. Among them, Europe, Asia and other regions maintained a relatively rapid growth rate. In terms of layout, the US still accounts for about 38 per cent, while China, Japan, the UK, Germany and Australia together account for about 32 per cent.
Capital and brand build barriers to industry entry. IDC industry is a capital-intensive industry, we think that only companies with strong financial strength can enter the industry, and the capital barrier is more obvious. In addition, the upstream and downstream have higher requirements for the continuity, safety and stability of IDC. We think that companies with longer operating time and good operating performance are often more favored, and the industry brand effect is obvious.
Mergers and acquisitions may become a trend in the global IDC market. The number of global data center mergers and acquisitions increased further in 2019, mainly due to the significant growth of private equity mergers and acquisitions. We believe that with the development of the industry, high-quality enterprises will be more favored, and mergers and acquisitions in the IDC industry may become a trend.
Global Switch: the world's leading data center owner, operator and developer. The company operates 13 data centers in London, Paris, Madrid, Frankfurt, Amsterdam, Singapore, Sydney and Hong Kong, China. The main advantages are: 1) located in several regional first-tier markets with strong customer demand; 2) proprietary land or long-term leased land provides industry-leading profitability for GS; 3) lower financing costs are conducive to rapid global expansion: Global Switch has the highest credit rating in the global data center industry and is able to expand rapidly with low-cost financing among capital-intensive companies.
Profit forecast and valuation. We estimate that the net profit of the company's main steel industry from 2020 to 2022 will be 4.58,5.17,570 million yuan respectively, and the EPS will be 0.21,0.23,0.26 yuan respectively. According to Global Switch2018's annual performance commitment, the company's deducted non-net profit in 2019-2021 will be no less than 259 million pounds, 307 million pounds and 353 million pounds respectively, with a compound growth rate of about 17 percent in 2019-2021. Considering that the major asset restructuring of the company is not yet over, the revenue and profits of GS will have a significant impact on the company's earnings and valuation if the reorganization is completed. Based on careful consideration, we give no rating to the company for the first time and only provide comparable company valuations for investors' reference.
Risk tips: the progress of GS acquisition is delayed; the revenue profitability of GS is lower than the performance commitment; the duration of overseas epidemic is too long; the profitability of the main steel industry is declining.
