20181205-中国银河国际证券-浪潮国际-00596.HK-Catch_the_Wave._Initiate_with_BUY_17页_1mb
报告摘要
Summary of Inspur International Ltd [0596.HK] Analysis
Core Content
Inspur International Ltd [0596.HK] is a leading information technology company that primarily provides professional human resources cloud services solutions for large and medium enterprises. The company operates in two major business segments: enterprise resource management (ERM)-related business and software outsourcing. In July 2018, Inspur completed the acquisition of a 76% stake in Inspur Tianyuan from its parent, Inspur Group, and Merit Express International through issuing 186 million new shares at HK$2.65 per share. The company is positioned to benefit from increasing IT spending in China, especially in the ERP and cloud computing sectors.
Main Viewpoints
- Strong Growth Prospects: Inspur is expected to deliver solid net profit growth of 88.1% in 2018E, 19.7% in 2019E, and 15.2% in 2020E. The company's current valuation of 13.0x 2018E is considered reasonable despite its strong year-to-date share price performance.
- ERP Market Growth: The ERP segment is one of the fastest-growing parts of China's enterprise software market, with a CAGR of 17.1% from 2011-2016. Inspur is a major beneficiary of this growth, as it covers over 26% of Fortune 500 Companies in China and has seen strong revenue growth from ERM-related services.
- Cloud Services Expansion: The company is actively expanding its cloud services business, which is expected to reach 50% of total revenue by 2030. Inspur has already diversified its cloud offerings to cover large, medium, and small enterprises, including HCM Cloud, Travel Cloud, e-Procure Cloud, Tax-control Cloud, and Cloud+. The company also provides big data services through Inspur Tianyuan, which has a strong presence in the Chinese market.
- Government Support: The Chinese government is promoting the adoption of cloud computing and local IT solutions, which is expected to benefit Inspur. The government's push for moving business to the cloud and supporting domestic software developers is a key driver for the company's growth.
- Competitive Position: Inspur has a strong presence in the SOE segment and is a key player in the ERP market. It differentiates itself by offering localized and customized solutions, which are more suitable for Chinese enterprises compared to foreign competitors like SAP and Oracle.
Key Information
Financial Highlights (in HKD m)
| Metric | 2016 | 2017* | 2018E | 2019E | 2020E |
|---|---|---|---|---|---|
| Revenue | 1,163.2 | 1,796.0 | 2,305.7 | 2,833.9 | 3,627.3 |
| Change (yoy %) | 19.7 | 54.4 | 28.4 | 22.9 | 28.0 |
| Gross Profit | 342.2 | 527.3 | 738.0 | 936.1 | 1,220.0 |
| Gross Margin % | 29.4 | 29.4 | 32.0 | 33.0 | 33.6 |
| Net Profit | 59.9 | 151.3 | 284.6 | 340.6 | 392.2 |
| Net Margin % | 5.1 | 8.4 | 12.3 | 12.0 | 10.8 |
| EPS (Basic) | 0.07 | 0.16 | 0.28 | 0.30 | 0.34 |
| Change (yoy %) | n.a. | 147.86 | 67.75 | 8.25 | 15.17 |
| DPS | $0.030 | $0.030 | $0.050 | $0.060 | $0.069 |
| ROE (%) | 3.4 | 7.9 | 11.6 | 11.5 | 12.0 |
| Dividend Yield (%) | 0.83 | 0.83 | 1.39 | 1.66 | 1.91 |
| PER (x) | 54.2 | 21.9 | 13.0 | 12.0 | 10.5 |
| PBR (x) | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 |
| FCF Yield (%) | 3.20% | -1.26% | 5.17% | 6.72% | 8.94% |
| Capex (m) | 29.6 | 25.7 | 27.7 | 29.8 | 32.1 |
| Free Cash Flow per Share | 0.1 | (0.0) | 0.2 | 0.2 | 0.3 |
Market Position and Trends
- ERP Market: Inspur is the fourth largest ERP solutions provider in China with a market share of about 11% in 2017. It is the leading provider of ERP solutions for SOEs.
- Cloud Computing: The global cloud computing market is expected to grow at a CAGR of 22.9% from 2016-2020, reaching US$162.1bn in 2020. Inspur's cloud services are expected to maintain a high growth rate.
- Government Policies: Favorable government policies are promoting the adoption of cloud computing and local IT solutions. SOEs are being encouraged to move their systems to the cloud, which is expected to increase IT spending.
- Diversification: Inspur has diversified its business to include both SOEs and SMEs, with products like PS Cloud for SMEs and Cloud+ for large enterprises.
- Strategic Acquisitions: The acquisition of Inspur Tianyuan is expected to support the company's growth in the cloud and big data sectors.
Risks
- A massive slowdown in IT spending in China
- Higher-than-expected marketing expenses
- Slower-than-expected growth in sales of ERM-related services
Investment Rationale
- BUY Recommendation: The company is expected to benefit from long-term growth in the ERP and cloud computing markets.
- Target Price: HK$4.50 (based on 18x 2018E PER), which is lower than its historical average and the average of its listed peers.
- Market Catalysts: Increasing market attention, positive government policies, and breakthroughs in new product launches are expected to drive share price performance.
Business Structure
- ERM-Related Business: Includes cloud services and software, covering large, medium, and small enterprises.
- Software Outsourcing Business: Provides IT outsourcing, business process outsourcing, data analysis, infrastructure maintenance, and cloud services.
Conclusion
Inspur International Ltd is well-positioned to benefit from the growing demand for ERP and cloud computing solutions in China, supported by strong government policies and increasing IT spending. The company's diversified business model and strategic acquisitions provide a solid foundation for future growth. Despite the risks, the company's current valuation and growth prospects support a BUY recommendation.
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