Event: the company released its interim results for 2021, with revenue of 2.72 billion yuan, an increase of 8.4% over the same period last year, of which revenue from traditional BSS business accounted for 78%, while revenue decreased slightly by 0.3% compared with the same period last year, mainly due to the rhythm impact caused by delays in signing orders from operators. On the other hand, the combined revenue of the three new businesses (OSS, vertical industry / enterprise cloud, and digital operation DSaaS) increased by 141% to 550 million yuan compared with the same period last year, expanding to 20%, while the gross profit margin increased by 1 percentage point to 36.7%, achieving a net profit of 280 million yuan, up 20% from the same period last year.
1H21's traditional BSS business declined slightly compared with the same period last year, but the rapid expansion of new business still drives steady growth in overall performance:
The revenue of the three new businesses of 1H21 is 550 million yuan, of which the income from OSS is 130 million yuan, which is a rapid increase of 135% over the same period last year. The revenue from vertical industries / enterprises on the cloud is 110 million yuan, an increase of 66% over the same period last year. The income from DSaaS is 310 million yuan, a rapid increase of 192% over the same period last year, accounting for 11% of revenue from 4% of 1H20.
Based on the improvement ceiling of traditional BSS and OSS market space and company share, we expect the company's carrier business to maintain low and steady single-digit growth. In the future, relying on vertical industry / enterprise cloud and DSaaS digital operation to expand non-operator market customers in parallel is expected to drive the overall performance to achieve sustainable double-digit growth. We expect revenue of CAGR 11% in 20-25 years.
DSaaS business cooperates with Tencent to accelerate customer coverage and drive it to upgrade from a project-based company to a platform company:
There are two main directions for the transformation of the company's cloud business: 1) DSaaS digital operation; 2) vertical industry / enterprise cloud. Benefiting from the high-speed growth dividend of China's cloud computing industry as a whole, the company's cloud business is expected to achieve high-speed growth based on its own vertical industry customized applications, cloud value operation and R & D capabilities, and bound with the operator's DICT strategy to jointly expand. Based on the fact that China Mobile's in-depth strategic partnership occupies the advantage of underlying data resources, the company's cloud business is expected to achieve rapid growth. We estimate that the revenue of DSaaS business and vertical industry / enterprise cloud business will be 56% and 33% respectively, and the share of revenue in 25 years is expected to increase to 32% CAGR 7.5%. In terms of DSaaS business, the company has carried out in-depth strategic cooperation with Tencent to carry out private domain traffic around Wechat ecology, which is expected to significantly expand customer coverage, covering millions of customers and business managers in communications, radio and television, finance and other industries, reaching more than 200 million Wechat users.
Profit forecast, valuation and rating: we maintain the 21-22 net profit forecast of 7.55 / 846 million yuan, corresponding to a year-on-year growth rate of 14% and 12% respectively, and an additional 23-year net profit forecast of 938 million yuan, corresponding to an 11% year-on-year growth rate. The company's latest price of HK $12.52 corresponds to a valuation margin of 13 times PE in 21 years, and the steady growth and stable dividend mechanism are attractive to a certain extent. In the future, switching to the PS valuation method after the volume of DSaaS business is expanded is expected to open the valuation space, maintain the target price of HK $14.8 (corresponding to 15 times PE for 21 years) and maintain the "buy" rating.
Risk hint: operator IT investment decline; new business transformation is not as expected.