20210129-招银国际-China_software___IT_services_New_Infrastructure_for_digital_transformation_90页_9mb

报告摘要

CMB International Securities | Equity Research | Sector Initiation: China Software & IT Services

Core Content

CMB International Securities has initiated coverage on the China software & IT services sector with an Outperform rating. The report highlights the New Infrastructure Plan and digital transformation as key drivers of growth for the industry, with a focus on cloud computing, SaaS (Software as a Service), and AI (Artificial Intelligence).

Main Points

Sector Growth: The China software industry has been growing consistently at 15-20% YoY, with a 19% CAGR from 2012 to 2019. It is expected to continue this growth trajectory in FY21E.
Market Structure: The sector is dominated by labor-intensive IT services (59% of total market), but there is a structural shift towards software products as enterprises increase IT spending.
New Infrastructure Plan: The government's push for New Infrastructure Investment is expected to drive growth in the IDC (Internet Data Center) and SaaS markets. Companies like GDS and Chinasoft are expected to benefit significantly from this trend.
AI Adoption: The China AI market is projected to grow at 38% CAGR through 2022E, driven by non-public security applications such as AI-powered cameras used during the pandemic. Despite U.S. sanctions, Hisilicon substitutes like Novatek and SigmaStar are expected to mitigate supply risks.
Investment Outlook: The sector is expected to outperform in FY21E, with cloud spending being the highest growth driver, followed by SaaS, then AI. The report suggests that lower market liquidity and tightening U.S. sanctions are the biggest downside risks.

Key Companies

BUY Recommendations

GDS (GDS US, 27% upside): Expected to benefit from the New Infrastructure Plan due to its market-leading position and major clients like Alibaba and Tencent. Target price: US$131.15.
GDS (9698 HK, 29% upside): Similar to the US listing, with a target price of HK$127.0.
Chinasoft (354 HK, 23% upside): Will support Huawei in its software ecosystem and benefit from cloud services and diversification. Target price: HK$11.35.
Glodon (002410 CH, 33% upside): A leader in construction software and the most successful enterprise software company undergoing SaaS transformation. Target price: RMB107.26.
Hikvision (002415 CH, 16% upside): Global leader in surveillance camera technology, with reduced supply chain risks and diversification into non-public security. Target price: RMB74.28.

HOLD Recommendations

Ming Yuan Cloud (909 HK, 4% upside): Expected to benefit from SaaS adoption in the real estate value chain. Target price: HK$48.75.
Dahua (002236 CH, 12% upside): Second to Hikvision in the surveillance camera market, but concerns about weaker R&D capabilities and margin pressures during supply chain transition are noted. Target price: RMB26.72.

Valuation Insights

Company	Ticker	Rating	Mkt Cap (US$ mn)	Price (LC)	TP (LC)	Upside (%)	EV/sales FY21E	P/E FY21E	ROE FY21E
GDS US	GDS US	BUY	19,323	103.39	131.15	27%	17.8	n.a.	n.a.
GDS HK	9698 HK	BUY	19,025	98.65	127.00	29%	17.6	n.a.	n.a.
Chinasoft HK	354 HK	BUY	3,462	9.24	11.35	23%	1.3	22.0	14%
Glodon CH	002410 CH	BUY	14,785	80.65	107.26	33%	17.8	144.1	11%
Hikvision CH	002415 CH	BUY	92,374	63.95	74.28	16%	7.7	37.5	30%
Ming Yuan Cloud HK	909 HK	HOLD	11,683	47.00	48.75	4%	29.8	157.7	32%
Dahua CH	002236 CH	HOLD	11,087	23.94	26.72	12%	2.1	17.7	23%

Industry Snapshot and Competitive Landscape

IDC Operators

GDS (9698 HK): Largest carrier-neutral IDC operator in China, with Alibaba and Tencent as major clients. High EBITDA margin (45%) and high utilization (69%).
21Vianet (VNET US): Largest retail IDC provider in China, with lower EBITDA margin (27%).
Sinnet (300383 CH): Backed by Shanghai Government, with high utilization (66%).
Baosight Software (600845 CH): Backed by Baosteel Group, with EBITDA margin (19%).

SaaS Companies

Glodon (002410 CH): Pioneer in construction software, with SaaS revenue contributing 40% of total revenue. Strong growth potential and high gross margin (93%).
Ming Yuan Cloud (909 HK): Focus on property development, with SaaS revenue growing at 50% CAGR. High FCF margin (28%) in FY19, expected to rise to 31% in FY22E.
Kingdee (268 HK): Horizontal SaaS provider, with high R&D investment (38%) and strong growth.

AI Companies

Hikvision (002415 CH): Global leader in surveillance camera technology, with AI adoption and diversification into non-public security.
Dahua (002236 CH): Second to Hikvision in the surveillance camera market, but lower R&D investment and lower EBITDA margin.

Summary

The China software & IT services sector is poised for multi-year growth driven by the New Infrastructure Plan and digital transformation. The cloudification trend, along with SaaS adoption and AI integration into traditional industries, presents significant opportunities. CMB recommends BUY for GDS, Chinasoft, Glodon, and Hikvision, while HOLD for Ming Yuan Cloud and Dahua. The report highlights the resilience of the sector and the potential for re-rating in FY21E, despite downside risks like lower market liquidity and U.S. sanctions.