20210827-招银国际-Public_cloud_growth_reaccelerating_9页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Information

• Company: Kingsoft Cloud (KC US)
• Sector: China Software & IT Services
• Analyst: Marley Ngan
• Recommendation: Maintain BUY
• Target Price: US$43.86 (Previously US$43.85)
• Price Performance (12M): Not provided in text, but chart available
• Market Cap (HK$ mn): 6,750
• Avg 3Mths t/o (HK$ mn): 51.81
• 52W High/Low (HK$): 74.67 / 23.81
• Total Issued Shares (mn): 224

Shareholding Structure

• Kingsoft Group (3888 HK): 43.6%
• Xiaomi (1810 HK): 13.8%
• Mr. Jun LEI: 13.8%

FY2Q21 Results

• Revenue: RMB2,174mn (+42% YoY, +20% QoQ)
• Gross Profit: RMB118mn (+47% YoY, +2% QoY), slightly below estimates
• Gross Margin: 5.5% (+0.2% YoY, -1% QoQ)
• Operating Loss: RMB320mn, beat estimates but below consensus
• Adj. EBITDA Loss: RMB55mn, better than estimates but below consensus
• Adj. EBITDA Margin: -2.5% (-0.2% YoY, +0.1% QoQ)
• Net Loss: -RMB220mn, narrowed compared to 2Q20

FY3Q21 Guidance

• Revenue Range: RMB2,580mn - RMB2,700mn (+49 - 56% YoY)
• Adj. EBITDA Margin: Expected to breakeven by end of the year

Key Factors for Positive Outlook

1. Public Cloud Growth Reaccelerating: Public cloud revenue grew by +20% YoY to RMB1,551mn
2. Partnership with Bytedance: KC and Bytedance jointly provide services to enterprises, improving visibility
3. New Customer Acquisition: Secured Meituan as a new customer
4. M&A with Camelot: Expected to consolidate in FY4Q21, helping improve margins
5. Self-Operated IDC: Phase one of new data center in Tianjin expected to be delivered in 4Q21, reducing costs

Financial Summary

Revenue Growth (YE 31 Dec)

Adj. EBITDA

Net Income

EPS (RMB)

P/S Ratio

Operating Model

• Revenue Breakdown:

  • Public Cloud Services: RMB6,385mn (FY21E), expected to decline in proportion to total revenue
  • Enterprise Cloud Services: RMB3,209mn (FY21E), growing as a percentage of total revenue
  • Others: RMB45mn (FY21E), minor contribution

• Cost of Sales Breakdown:

  • IDC Costs: RMB5,121mn (FY21E), expected to decrease as a percentage of total revenue
  • Depreciation and Amortization Costs: RMB913mn (FY21E)
  • Staff Costs: RMB70mn (FY21E)
  • Other Costs: RMB2,927mn (FY21E)

• Key Operating Metrics:

  • Public Cloud:
    • No. of premium customers: 201 (FY21E), growing YoY
    • Net dollar retention rate: 121% (FY21E)
    • Avg. revenue per premium customer: RMB31.2mn (FY21E)
  • Enterprise Cloud:
    • No. of premium customers: 223 (FY21E)
    • Avg. revenue per premium customer: RMB14.3mn (FY21E)

Valuation

• Maintain BUY: Target price at US$43.86, based on 4.5x FY22E P/S
• Peer Comparison:
  • P/S Ratio:
    • FY21E: 4.5
    • FY22E: 3.1
  • EV/sales:
    • FY21E: 4.0
    • FY22E: 2.6
  • Sales CAGR (FY20-23E): 42%
  • Adj. EBITDA Margin (FY21): 0%

Conclusion

Kingsoft Cloud is showing positive signs with strong revenue growth, especially in public cloud services. The company's collaboration with Bytedance and acquisition of Camelot are key strategies that could enhance its financial performance and market visibility. The company is expected to improve its adj. EBITDA margin through these initiatives and its self-operated data center. Despite a slight decline in adj. EBITDA margin in FY2Q21, the outlook remains upbeat due to improved guidance for FY3Q21 and the potential for long-term margin improvement. The valuation remains at 4.5x FY22E P/S, supporting the BUY recommendation.