20180823-东英亚洲证券-中国软件国际-00354.HK-1H18_results_in_line_7页_1mb
报告摘要
ChinaSoft International (354 HK) Summary
Core Content
ChinaSoft International (CSI) is a leading global IT outsourcing and solution service company. The company's financial performance and strategic direction have been analyzed in this report, focusing on its 1H18 results, earnings revisions, and valuation metrics.
Key Data
- Close Price: HK$5.94 (as of 22/08/2018)
- Target Price: HK$8.50 (+44% from prior target price)
- 12 Months High: HK$7.70
- 12 Month Low: HK$4.02
- 3M Avg Daily Vol.: 14.24 million HKD
- Issue Share: 2,429.77 million
- Market Cap: HK$14,432.85 million
- Fiscal Year: 12/2017
- Major Shareholders:
- Dr. Chen
- Yu Hong (11.01%)
1H18 Results
- Revenue: RMB4,814 million (+16% YoY), with TPG services and IIG services contributing 83% and 16% respectively.
- Net Earnings: RMB359 million (+46% YoY)
- Gross Margin: Increased by 1.3ppts to 28.9% in 1H18 from 27.6% in 1H17.
- Selling Expenses: Rose by 58.6% YoY to RMB233 million due to expansion into tier one cities and increased overseas market coverage.
Earnings Revisions
- FY18E Revenue: Revised down by 4.4% to RMB10,525 million due to slowing traditional business.
- FY19E Revenue: Revised down by 6.4% to RMB11,789 million.
- Adj. Net Profit: Revised down by 0.6% to RMB787 million for FY18E and up by 6.2% to RMB887 million for FY19E.
- Diluted Adj EPS: Revised down by 3.8% to HK$0.316 for FY18E and down by 2.1% to HK$0.356 for FY19E.
- Gross Margin: Revised up by 1.0ppt to 31.9% for FY18E and 1.2ppts to 32.2% for FY19E.
Valuation Metrics
- P/E (x): 18.8 for FY18E, 16.7 for FY19E
- P/B (x): 2.0 for FY18E, 1.8 for FY19E
- Yield (%): 0.3% for FY18E, 0.3% for FY19E
- DPS (HK$): HK$0.017 for FY18E, HK$0.020 for FY19E
- ROE (%): 14.2 for FY18E, 14.0 for FY19E
- Target Price: HK$8.50 based on 25x FY19E PE
Financial Summary
| Item | FY16A (RMB mn) | FY17A (RMB mn) | FY18E (RMB mn) | FY19E (RMB mn) | FY20E (RMB mn) |
|---|---|---|---|---|---|
| Revenue | 6,783 | 9,244 | 10,525 | 11,789 | 12,658 |
| Gross Profit | 2,016 | 2,750 | 3,358 | 3,795 | 4,109 |
| Gross Margin (%) | 29.7% | 29.8% | 31.9% | 32.2% | 32.5% |
| Adj. Net Profit | 493 | 716 | 787 | 887 | 999 |
| Diluted Adj EPS (HK$) | 0.247 | 0.328 | 0.316 | 0.356 | 0.402 |
| Net Margin (%) | 7.3% | 7.7% | 7.5% | 7.5% | 7.9% |
| Operating Margin (%) | 8.9% | 8.0% | 9.3% | 9.9% | 10.2% |
Key Ratios
- Gross Margin (%): 31.9% for FY18E, 32.2% for FY19E
- Selling & Distribution / Sales (%): 4.4% for FY18E, 4.3% for FY19E
- Admin / Sales (%): 11.5% for FY18E, 11.4% for FY19E
- R&D / Sales (%): 6.2% for FY18E, 6.1% for FY19E
- Adj. Net Margin (%): 7.5% for FY18E, 7.5% for FY19E
- ROE (%): 14.2% for FY18E, 14.0% for FY19E
- ROIC (%): 15.9% for FY18E, 18.1% for FY19E
- Current Ratio (x): 2.69 for FY18E, 2.81 for FY19E
- Quick Ratio (x): 2.68 for FY18E, 2.80 for FY19E
- Inventory T/O (days): 1 day for FY18E, 1 day for FY19E
- AR T/O (days): 78 days for FY18E, 78 days for FY19E
- AP T/O (days): 89 days for FY18E, 89 days for FY19E
- Cash Conversion Cycle (days): 10 days for FY18E, 10 days for FY19E
- Asset Turnover (x): 1.14 for FY18E, 1.16 for FY19E
- Financial Leverage (x): 1.66 for FY18E, 1.61 for FY19E
- EBIT Margin (%): 9.3% for FY18E, 9.9% for FY19E
- Interest Burden (x): 0.89 for FY18E, 0.90 for FY19E
- Tax Burden (x): 0.91 for FY18E, 0.85 for FY19E
Peer Group Comparison
| Company | Ticker | Price (HK$) | Mkt Cap (US$m) | 3-Month Avg T/O (US$m) | PER Hist (x) | PER FY1 (x) | PER FY2 (x) | EPS FY1 YoY% | EPS FY2 YoY% | 3-Yr EPS Cagr (%) | PEG (x) | Div Yld Hist (%) | Div Yld FY1 (%) | P/B Hist (x) | P/B FY1 (x) | EV/EBITDA Hist (x) | EV/EBITDA Net Margin (%) | Net Margin (%) | ROE Hist (%) | ROE FY1 (%) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Chinasoft Intl | 354 HK | 5.94 | 1,839 | 11.2 | 18.9 | 19.6 | 17.4 | (3.5) | 12.7 | 18.5 | 1.74 | 0.8 | 1.1 | 3.75 | 3.61 | 16.0 | 13.8 | 7.3 | 29.8 | 29.8 |
| HSI | - | 27,927.58 | - | - | 10.8 | 11.4 | 10.2 | (5.3) | 10.9 | 4.9 | 2.31 | 3.8 | 3.6 | 1.27 | 1.25 | - | - | 13.6 | 15.1 | 15.1 |
| HSCEI | - | 10,850.17 | - | - | 8.2 | 7.8 | 7.1 | 5.1 | 10.6 | 8.5 | 0.92 | 4.3 | 4.3 | 0.95 | 0.95 | - | - | 13.6 | 10.6 | 10.2 |
| CSI300 | - | 3,307.96 | - | - | 12.4 | 11.2 | 9.7 | 11.3 | 15.3 | 18.5 | 2.62 | 2.4 | 2.8 | 1.62 | 1.49 | - | - | 18.5 | 16.2 | 15.1 |
| Infosys Ltd | - | INFO IN | 1,383.95 | 43,264 | 83.5 | 19.5 | 18.9 | 17.3 | 2.9 | 9.6 | 7.5 | 3.1 | 3.5 | 4.96 | 4.72 | 14.7 | 13.3 | 13.6 | 22.6 | 25.0 |
| Tata Consultancy | - | TCS IN | 2,017.65 | 110,559 | 95.5 | 30.1 | 25.1 | 22.6 | 19.6 | 11.1 | 13.4 | 1.87 | 1.3 | 1.8 | 8.80 | 22.6 | 19.0 | 14.3 | 21.0 | 15.0 |
| Cognizant Tech-A | - | CTSH US | 74.75 | 43,372 | 263.0 | 29.4 | 16.6 | 14.7 | 77.8 | 12.3 | 29.7 | 0.56 | 1.0 | 1.0 | 4.07 | 13.6 | 10.6 | 12.8 | 10.2 | 13.8 |
| Wipro Ltd-Adr | - | WIT US | 5.10 | 23,073 | 5.3 | N/A | 18.7 | 17.3 | N/A | 8.1 | N/A | N/A | 0.3 | 1.2 | N/A | 13.6 | 12.8 | 14.7 | 15.5 | |
| Travelsky Tech-H | - | 696 HK | 20.85 | 7,772 | 8.7 | 23.6 | 19.7 | 16.8 | 20.0 | 17.2 | 16.5 | 1.19 | 1.4 | 1.6 | 3.45 | 15.6 | 13.2 | 13.6 | 33.4 | 15.4 |
| Kingdee Intl Sft | - | 268 HK | 8.43 | 3,533 | 48.7 | 66.5 | 63.9 | 48.3 | 4.2 | 32.2 | 25.1 | 2.55 | 0.2 | 0.2 | 4.56 | 28.8 | 26.8 | 13.5 | 33.4 | 15.0 |
| Neusoft Corp-A | - | 600718 CH | 12.36 | 2,245 | 24.4 | 14.4 | 28.5 | 25.0 | (49.7) | 14.3 | (10.9) | N/A | 0.7 | 0.7 | 1.72 | - | 15.0 | 12.6 | 5.2 | |
| Adjusted Sector Avg* | - | - | - | - | 23.4 | 21.3 | 18.9 | 12.5 | 12.1 | 18.5 | 1.74 | 0.8 | 1.1 | 3.75 | 3.61 | 16.0 | 13.8 | 0.0 | 35.3 | 15.1 |
*Outliners and "N/A" entries are in red and excluded from the calculation of averages.
Recent Reports
- 17/08/2018: Upgrade on NDR takeaways: far from full swing (China Youzan, 8083) - BUY
- 17/08/2018: Downgrade on rich valuation (Kingdee Int'l, 268) - HOLD
- 15/08/2018: Negative surprise on optical component GPM (Sunny Optical, 2382) - BUY
- 15/08/2018: 1H18 GPM hits historical high (Anta Sports, 2020) - BUY
- 14/08/2018: 1H18 results up to expectations (Li Ning, 2331) - BUY
- 09/08/2018: 1H18E profit warning (CH Display OPT, 334) - BUY
- 06/08/2018: The best is yet to be (China Youzan, 8083) - BUY
- 25/07/2018: Higher visibility for under-glass FPM (Q Tech, 1478) - HOLD
- 18/07/2018: 1H18 results preview: Sunny days ahead (Sunny Optical, 2382) - BUY
- 18/07/2018: Double disappointments (Q Tech, 1478) - SELL
- 18/07/2018: 2Q18 shipments steaming on (TCL Electronics, 1070) - BUY
- 13/07/2018: 2Q18 operations on track (361 Degrees International, 1361) - BUY
- 10/07/2018: June shipments on track (Q Tech, 1478) - SELL
- 06/07/2018: 1H18E results preview (Kingdee Int'l, 268) - BUY
- 06/07/2018: Upgrade on better than expected 2Q18 (Xstep Intl, 1368) - BUY
- 04/07/2018: Upgrade on alliance with Tencent to boost paid merchant growth (China Youzan, 8083) - BUY
- 04/07/2018: Key takeaways from Guangzhou site visit (Anta Sports, 2020) - BUY
- 29/06/2018: Largest Chinese private chemical EPC company (Wison Engineering, 2236) - Not Rated
- 27/06/2018: Powering the world's batteries (Tsaker Chemical, 1986) - Not Rated
- 26/06/2018: 2Q18E operations preview (Xstep Intl, 1368) - BUY
- 20/06/2018: Downgrade on negative surprise in the abolition of rebate (HNA Infrastructure, 357) - HOLD
- 15/06/2018: Shaky claim by GMT makes no sense (361 Degrees International, 1361) - BUY
- 11/06/2018: Uptick in May shipments as downstream picks up (Sunny Optical, 2382) - BUY
- 11/06/2018: May shipments in-line (Q Tech, 1478) - SELL
- 11/06/2018: Raise bet to capture boosting IoT market (CH Display OPT, 334) - BUY
- 05/06/2018: Asset injection (TCL Multimedia, 1070) - Not Rated
Main Points and Key Information
- Performance: CSI delivered solid 1H18 results with revenue and net earnings up by 16% and 46% YoY, respectively, in line with OP expectations.
- Growth Drivers: Key growth drivers include the expansion of the Big Data and Cloud business, which has led to improved GPM and is expected to be sustainable in the mid-term.
- Challenges: Selling expenses increased significantly due to market expansion efforts, and there are risks of slower revenue growth in cloud services and higher staff costs.
- Earnings Revisions: FY18/19E core earnings estimates were revised down by 0.6% and 6.2%, respectively, due to slowing traditional business.
- Valuation: The target price was adjusted to HK$8.50 based on a rolled forward 25x FY19E PE, reflecting margin expansion and recurring revenue models.
- Financial Health: CSI maintains a healthy current and quick ratio, with positive cash flow and a declining P/B ratio, indicating strong liquidity and asset efficiency.
Conclusion
ChinaSoft International (CSI) continues to show resilience in its financial performance, with a solid 1H18 result and strategic initiatives in emerging markets and services. Despite challenges in traditional business and rising selling expenses, the company's focus on margin expansion and recurring revenue models supports its BUY rating with an adjusted target price. The financial metrics suggest a healthy balance sheet and good operational efficiency.
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