Main points of investment:
Dr. Peng has more than 10 years of experience in cloud network operation and is a "veteran" of private enterprises in the communications industry. After many business adjustments, the company's main business can be sorted out into IDC, cloud network technology, global communications SDN network and other sectors, including Internet access (basic broadband services for C-end and B-end + cloud / SaaS value-added services), data center (IDC construction + operation), and subsidiary PLD Pacific optical cable related (PLCN cross-sea optical cable) and so on.
After three major changes, the company has experienced three rounds of traditional special steel smelting-telecom value-added, length, width and height increase + IDC reserve, and pattern change to seek transformation, and finally focus on the data center industry from broadband services. On the one hand, the company's telecom value-added services have covered provinces and cities across the country in the past decade, and it has become the "fourth largest fixed-line broadband operator" in China by virtue of Great Wall Broadband; on the other hand, the core IDC business has been greatly reserved and currently operates about 30,000 cabinets, covering places such as North Shanghai, Guangzhou and Shenzhen, Chengdu and Wuhan.
The core change lies in the gradual resolution of financial and business problems, and the future IDC operation will turn to HOMM mode, with a clear strategic path and a clear reversal at the bottom. Great Wall Broadband has grown rapidly in the past, but it is difficult to withstand the changes in the pattern. The volume and price of the company's broadband business have been greatly impacted, the three tables have been dragged down, and the assets and liabilities, costs and expenses have been affected to varying degrees by internal and external effects.
(1) Financial adjustment: invigorate assets and improve balance sheet, repay interest-bearing liabilities to solve the pressure of financial expenses and working capital, for the three previously formed liabilities (17 Pengbo debt, 18 Pengbo debt and overseas US dollar debt), the company seeks solutions through a series of ways such as introducing external capital support and invigorating assets. The financial risk will be cleared at the bottom.
(2) Business adjustment: positive pattern changes and historical burden, actively adjust Internet access services, mainly in the form of broadband user transfer and business cooperation with operators. The operating risk will be cleared at the bottom.
(3) IDC focuses on the core barriers-customer capability and long-term operation capability. It is clear that the asset-heavy IDC project will be transformed into the HOMM model, from simple self-construction to self-construction + co-construction + entrusted operation mode, while carrying out major customer customization; invigorating the stock IDC assets that have reached production, while retaining the right of operation, emphasizing "light assets and heavy operation".
Barriers are the core of the pattern. In the past, the essence of bargain competition in the broadband industry was relatively low barriers and homogenization of products, which made it difficult to resist the evolution of technology and policies; at present, the company focuses on professional development and operation and many years of business experience and customer resources. provide full-cycle management similar to "hotel property", with stable revenue, strong replicability, mutual complementarity and reduced risk.
Cover for the first time and give a buy rating. The company actively adjusts its broadband business to form the "bottom of performance" with the stock of IDC projects; the future resource reserve is abundant, and the HOMM model reflects the company's strong customer resources and operation capacity. It is estimated that the return net profit of the company from 2020 to 2022 is 3.79,5.06 and 681 million yuan respectively, of which the loss will be reversed in 2020, and the corresponding three-year PE will be 47x, 35x and 26x. With a reasonable assumption of 45x PE in 21 years, the current margin of safety is highlighted. For the first time, consider the compaction of the bottom of the company, the inflection point will appear, and give the buy rating.
Core hypothetical risks: the adjustment progress of broadband access services is affected by external factors; third-party cooperation in IDC may be uncertain.
