20161121-东英亚洲证券-中国擎天软件-01297.HK-Jiangsu_player_surging_ahead_with_export_tax_solution_22页_874kb

Sinosoft Technology Group Limited (1297 HK) Equity Research Summary

Core Content

Sinosoft Technology Group Limited is a leading provider of application software products and services, primarily focusing on export tax solutions, e-government solutions, and carbon management solutions. The report highlights its strong market position, strategic partnerships, and growth prospects across these sectors.

Key Highlights

1. Company Overview

• Sinosoft is the only appointed export tax software provider in Jiangsu Province, holding 100% market share.
• The company provides a range of software and services to improve export tax filing, exemption, deduction, and rebate processes.
• It also offers e-government solutions and carbon management platforms for governments and enterprises.

2. Market Position and Strategic Partnerships

• Sinosoft has a strategic partnership with Aisino (600271 CH), the IT arm of China Aerospace Science and Industry Corporation, to expand its export tax software beyond Jiangsu.
• It has also formed a strategic partnership with Alibaba Cloud to develop a low-carbon cloud platform, leveraging big data and cloud computing technologies.

3. Revenue Streams and Growth Drivers

Export Tax Solution

• Market Share: 100% in Jiangsu Province, 32% in China (free version) in 2012.
• Growth Projections: Expected to grow at 17% CAGR from FY15 to FY18E.
• New Opportunities:
  • VAT solutions: Expected to contribute RMB13mn/RMB20mn/RMB30mn in FY16/17/18E.
  • Oversea visitors sales tax refund: Expected to contribute RMB0.5mn/RMB1mn in FY16/17E.

E-Government Solution

• Growth: Expected to grow at 23% CAGR from FY15 to FY18E.
• Products: Includes judiciary big data solutions, community management cloud platforms, discipline supervision systems, and courier industry integration platforms.
• Demand Drivers: Increasing adoption of mobile applications and big data analysis.

Carbon Management Solution

• Market Launch: China's carbon trading market is expected to launch in 2017E, with Sinosoft well-positioned to benefit.
• Growth: Expected to grow at 39% CAGR from FY15 to FY18E.
• Current Revenue: Enables 15,000 key enterprises to report greenhouse gas emissions in real time.
• Partnership: Collaborates with Alibaba Cloud to develop a low-carbon cloud platform.

4. Financial Performance and Valuation

• Current Price: HK$3.26 (as of 18/11/2016)
• Target Price: HK$5.30 (+63%)
• Valuation: Based on 25x FY17E PE, representing a 48% discount to peers.
• Revenue Growth: Expected to grow at 25% CAGR from FY15 to FY18E.
• Net Profit Growth: Expected to grow at 23% CAGR from FY15 to FY18E.

5. Risks

• Economic Slowdown: Could impact export sales.
• Carbon Trading Delay: Potential delay in the launch of the carbon trading market.

Main Viewpoints

• Sinosoft is well-positioned to benefit from the growing demand for e-government solutions, carbon management, and export tax software due to its strategic partnerships with Aisino and Alibaba Cloud.
• The company's export tax software business is expected to expand beyond Jiangsu with the help of Aisino's distribution network.
• The carbon trading market launch in 2017E is anticipated to significantly boost carbon management solution demand.
• The recent share price correction in 1H16 presents an attractive entry opportunity, with strong growth prospects in the mid to long term.

Key Information

• Major Shareholder: Xin Yingmei & family (46.19%)
• Market Cap: HK$4,038.19 million
• Issue Share: 1,238.71 million
• 3M Avg Daily Vol: 2.61 million
• 12M High/Low: HK$4.25 / HK$2.64
• 1H16 Revenue Breakdown:
  • 90% from export tax solutions in Jiangsu Province.
  • 40% of e-government revenue from Jiangsu Province, with 60% from Beijing, Tianjin, Hebei, Liaoning, and Inner Mongolia.
• Strategic Collaborations:
  • Aisino (600271 CH) for export tax expansion.
  • Alibaba Cloud for carbon management and big data solutions.
• Growth Projections:
  • Tax software and related services: 21% CAGR from RMB121mn in FY15 to RMB218mn in FY18E.
  • E-government solutions: 23% CAGR from RMB183mn in FY15 to RMB343mn in FY18E.
  • Carbon solutions: 39% CAGR from RMB87mn in FY15 to RMB231mn in FY18E.

Investment Recommendation

• Rating: BUY
• Target Price: HK$5.30
• Rationale: Strong growth potential in tax-related, e-government, and carbon management sectors, supported by strategic partnerships and market expansion efforts.