20230117-招银国际-汇通达网络-09878.HK-Quality_growth_with_advanced_profitability_5页_538kb

Huitongda Network (9878 HK) Summary

Core Content and Key Insights

Huitongda Network (HTD) is a company that is expected to deliver quality growth and advanced profitability in the long term. The research report highlights that the company's performance in 2H22E and 1Q23E was affected by the epidemic outbreak and reopening impact, but the market has already anticipated these challenges.

Main Points

• Earnings Growth Forecast:

  • The company is projected to achieve >30% YoY earnings growth in FY23E.
  • Revenue growth is forecasted at 21% YoY in FY23E, which is still above the industrial average of +12% YoY.

• Margin Expansion:

  • GPM is expected to sequentially increase to 3.3% in 2H22E.
  • OPM is forecasted to reach 1.2% in 2H22E, up by 0.4 ppts compared to the previous period.
  • The company is focusing on high-quality growth and margin improvement in FY23E rather than aggressive expansion.

• Shareholder Confidence:

  • Certain shareholders have made voluntary lock-up undertakings, indicating confidence in the company's long-term prospects.

• Valuation and Target Price:

  • The target price (TP) has been adjusted to HK$63.2, reflecting a 0.25x FY23E P/S or 43x FY23E P/E.
  • This TP is +52.6% above the current price of HK$41.4.

• Business Segments:

  • Commerce business dominates the revenue, accounting for 98.8% of total revenue in FY23E.
  • Service business is expected to grow significantly, with +30% YoY revenue forecast for FY23E.
  • Others account for a small portion of the total revenue, and growth is moderate.

• Earnings Summary:

  • Revenue for FY22E is expected to be RMB 81,372 million.
  • Adjusted net profit is forecasted at RMB 431 million for FY22E, with a growth of +31.7% YoY.
  • Adjusted EPS is expected to be RMB 0.8 for FY22E, with a +31.7% YoY increase.

• Peer Comparison:

  • The company's valuation is compared with other peers such as JD.com, Baozun, and Pinduoduo.
  • HTD is considered to have a 55% discount to JD based on SOTP valuation.

Key Financial Metrics

Shareholding and Performance

• Shareholding Structure:

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

• Share Performance:

  • 1-month: +25.8% (Absolute), +12.0% (Relative)
  • 3-months: +15.6% (Absolute), -11.8% (Relative)
  • 6-months: -22.9% (Absolute), -28.0% (Relative)

• 12-month Price Performance: As per the chart, the stock has shown a range of HK$27.9 to HK$64.7.

Valuation and Peer Comparison

• SOTP Valuation:

  • Commerce business: 0.20x FY23E EV/Sales, valued at RMB 19,515 million
  • Service business: 5.0x FY23E EV/Sales, valued at RMB 5,125 million
  • Total Enterprise Value: RMB 24,640 million
  • Equity Value: RMB 30,080 million
  • TP based on SOTP: HK$63

• Peer Comparison:

  • Ecommerce average EV/Sales: 1.7x
  • SaaS average EV/Sales: 3.5x
  • HTD is expected to trade at 0.25x FY23E P/S or 43x FY23E P/E, suggesting a 55% discount to JD.

Analyst Ratings

• CMBIGM Rating: BUY
• Target Price (TP): HK$63.2
• Previous TP: HK$70.0
• TP Change: +52.6%

Financial Summary

• Income Statement:

  • Revenue: RMB 81,372 million (FY22E)
  • Gross profit: RMB 2,522 million
  • Operating profit (IFRS): RMB 817 million
  • Adj. Net Profit: RMB 431 million

• Cash Flow Summary:

  • Operating CF: RMB 671 million (FY22E)
  • Investing CF: RMB (45) million (FY22E)
  • Financing CF: RMB 1,977 million (FY22E)
  • Net change in cash: RMB 2,602 million

• Balance Sheet:

  • Total Equity: RMB 10,104 million (FY22E)
  • Shareholders' Equity: RMB 10,184 million (FY22E)

Key Ratios

Analyst Certification

• The analyst certifies that all views expressed accurately reflect their personal views.
• No part of their compensation is directly or indirectly related to the specific views expressed in the report.
• The analyst has not traded in the stock covered in the report within 30 calendar days prior to the report's issue date.
• The analyst will not trade in the stock covered in the report for 3 business days after the issue date.
• The analyst does not serve as an officer of any Hong Kong listed companies covered in the report and has no financial interests in them.

Important Disclosures

• There are risks involved in transacting in any securities.
• The information in this report is not suitable for all investors.
• CMBIGM does not provide individually tailored investment advice.
• The report is not a recommendation to buy or sell securities.
• Past performance is not indicative of future performance.
• The value of investments may fluctuate due to market factors.