20220829-招银国际-汇通达网络-09878.HK-Resilient_growth_in_2H22_4页_840kb

Huitongda Network (9878 HK) Summary

Core Content

Huitongda Network (HTD) reported strong performance in 1H22, with revenue and adjusted net profit growing by 33% and 57.7% YoY, respectively, surpassing expectations by 8% and 6%. The company's resilience in low-tier cities and expansion into new categories such as liquor & beverages, agricultural means of production, vehicles & auto parts merchandise, and consumer electronics contributed to the growth of the commerce business. The service business, particularly SaaS+ subscriptions, saw a remarkable 259% YoY increase, driven by demand for efficiency improvements in a challenging macroeconomic environment.

In 2H22E, HTD is expected to maintain its growth momentum, with revenue projected to rise by 28% YoY. This growth will be supported by three key factors: continued expansion in the commerce business, deeper penetration of SaaS+ services, and the ramp-up of auto-related initiatives. The management has reiterated its guidance for FY22E, aiming for top-line and bottom-line growth of over 30% and 50%, respectively.

The company is also targeting RMB10bn in revenue from NEV (New Energy Vehicle) initiatives over the next two to three years. HTD plans to collaborate with upstream and downstream NEV companies to achieve this goal. Additionally, SaaS+ subscription growth is expected to maintain a CAGR of over 80%, with a retention rate of 80% (up from 54% in FY21 and 65% in 1H22).

Key Financial Highlights

Earnings Forecast and Target Price

• Earnings Forecast (FY22-24E): CMBIGM slightly lifted its forecasts by 0%–2%, factoring in resilient demand in low-tier markets and continuous category expansion.
• Target Price (TP): HK$70.0 (up from HK$66.0), representing a +23.9% upside from the current price of HK$56.5.
• Valuation: Based on a 42x P/E for FY23 and 26x P/E for FY24.

Revenue Breakdown

• Commerce business: Dominates the revenue mix (99.0% in 1H22), with consistent growth across periods.
• Service business: Grew significantly (117.2% YoY in 1H22), with SaaS+ subscriptions being the main driver.
• Others: A minor portion of revenue, contributing less than 1% in 1H22.

Analyst Recommendations

• Ratings: BUY
• Reasoning: Strong growth momentum, resilient demand in low-tier markets, and continuous category expansion support the BUY rating.
• Outlook: HTD is expected to outperform the market over the next 12 months.

Shareholding and Performance

• Shareholding Structure:

  • Wang Jianguo: 21.92%
  • Alibaba China: 13.82%
  • Xu Xiuxian: 10.15%

• Share Performance:

  • 1-mth: 13.5% absolute, 18.1% relative
  • 3-mth: 35.2% absolute, 41.7% relative
  • 6-mth: 41.6% absolute, 73.1% relative

Key Ratios

Analysts

• Sophie Huang
  Email: sophiehuang@cmbi.com.hk
  Phone: (852) 3900 0889

• Eason Xu
  Email: easonxu@cmbi.com.hk
  Phone: (852) 3900 0849

Important Disclosures

• The report is prepared for information purposes only and should not be construed as an offer or solicitation to buy or sell any security.
• CMBIGM does not provide individually tailored investment advice.
• Past performance is not indicative of future results.
• The information is subject to change without notice.
• CMBIGM may have conflicts of interest and is not liable for any loss or damage resulting from reliance on this report.

Regulatory Information

• Auditor: KPMG

• CMBIGM Ratings:

  • BUY: Potential return of over 15% over next 12 months
  • HOLD: Potential return of +15% to -10% over next 12 months
  • SELL: Potential loss of over 10% over next 12 months
  • NOT RATED: Not rated by CMBIGM

• Industry Outlook:

  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark
  • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark
  • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark

Distribution Restrictions

• UK: Only for persons within Article 19(5) or Article 49(2) of the Financial Promotion Order.
• US: Intended solely for "major US institutional investors" and must be used through a U.S.-registered broker-dealer.
• Singapore: Distributed by CMBISG, an Exempt Financial Adviser, and must be used with caution.

Contact Information

CMB International Global Markets Limited
Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong
Tel: (852) 3900 0888
Fax: (852) 3900 0800

CMB International Global Markets Limited is a wholly owned subsidiary of CMB International Capital Corporation Limited, which is a subsidiary of China Merchants Bank.