“New infrastructure” business sets sail
The company announced on the evening of August 24 that the company's holding subsidiary Tefat Information Data Technology signed a strategic cooperation agreement with Shenzhen Mobile (941 HK, no rating). The two parties will cooperate around data centers and 5G smart parks. Furthermore, the company's board of directors deliberated and passed the “Bill on the Company's Establishment of Subsidiaries”. The company plans to establish wholly-owned subsidiaries to expand construction service business around data centers, smart cities, and smart parks. We believe that in the context of new infrastructure, the company is expected to rely on better ToB and ToG market expansion capabilities to expand the information technology business represented by data centers and create new growth points.
We expect the company's EPS from 2020 to 2022 to be 0.11/0.39/0.50 yuan respectively. Based on the segmented valuation method, we will maintain the target price of 13.79 yuan and maintain the “increase in holdings” rating.
Joining hands with Shenzhen Mobile to boost data center business
Tefat Information Data Technology (later referred to as Data Technology for short), a holding subsidiary of the company, signed a strategic cooperation agreement with Shenzhen Mobile to jointly build a first-class data center. In this cooperation, Data Technology plans to build a data center project on the west side of Longguan East Road in Longhua District of Shenzhen. The total scale of the project is no less than 4,000 8kw racks, which will be used by a single leading Internet customer in the form of customized construction and services. We believe that this cooperation will help further expand the company's business scale in the data center field, enhance the company's core competitiveness in the data center field, and is expected to lay the foundation for the company and Shenzhen Mobile to deepen their continuous cooperation in the data center field in the future.
Set up a subsidiary to lay out information integration business
The 32nd meeting of the 7th board of directors of the company deliberated and passed the “Proposal on the Company's Establishment of Subsidiaries”. Tefat Information intends to establish Shenzhen Tefa Information Technology Service Co., Ltd. with its own funds, with a registered capital of 40 million, which will be wholly owned by the listed company. The subsidiary's business scope is mainly integrated business for communication engineering, data centers, smart cities, smart parks, etc. On July 14 this year, Shenzhen issued the “Implementation Opinions on Accelerating the Construction of New Infrastructure (2020 to 2025)”. The two municipal governments jointly planned 95 new infrastructure projects, with a total investment of 41.19 billion yuan. We believe that the new infrastructure is expected to start a new round of urban upgrading, and the company's establishment of subsidiaries is expected to expand the information integration business, which is expected to share the industry's growth dividends.
The main business is improving, and the “new infrastructure” business is expected to bring new growth points, maintain the “increase” rating company's original business, which mainly focuses on optical communication and military informatization, forming a two-wheel drive pattern. In terms of optical communication business, we believe that, driven by large-scale construction of 5G networks, the optical module business is expected to drive profit improvement in this business segment. In terms of military business, the company actively promotes product iteration and customer expansion, which is expected to share the industry's growth dividends. In addition to this, the company is expected to rely on its status as a local state-owned enterprise and market expansion capabilities built on the ToB and ToG side over the years to expand its business layout towards “new infrastructure”
Expand fields and create new growth points. We believe that the company's main business is improving, and at the same time, it is expected to develop “new infrastructure” related business. We expect the company's EPS from 2020 to 2022 to be 0.11/0.39/0.50 yuan respectively. Based on the segmented valuation method, we will maintain the target price of 13.79 yuan and maintain the “increase in holdings” rating.
Risk warning: Increased competition in the optical fiber and cable industry has led to a decline in profitability; data center business expansion is limited by shrinking energy consumption indicators in first-tier cities.