华星创业(300025.CN)

Hangzhou Huaxing Chuangye Communication:Positive on IDC and Cloud Computing Outlook

时间:16-06-02 00:00    来源:兴业证券

Company Profilel

Hangzhou Huaxing Chuangye Communication Technology (300025: SZ) is manly engaged inproviding mobile telecommunication technology services as well as the R&D, production,testing and optimization of systems.

Event

Hangzhou Huaxing Chuangye Communication Technology plans to fully acquire Shenzhen PublicInformation through stock offering, with total consideration of CNY 1billion. The shares will beoffered at CNY 17.31per share. In addition, the company has raised CNY 1billion funds throughinquiry. Of the CNY 1billion, CNY 500million will be invested on the optical access project inGuangdong Province, CNY 480million will be used to supplement working capital. In addition,the company has acquired 51% stake in BIH, as part of the efforts to expanding into the IDC andcloud businesses.

Comment

The acquisition of Public Information strongly boosts the company’s earnings. HangzhouHuaxing Chuangye Communication Technology plans to fully acquire Public Information throughstock offering, with total considerations of CNY 1billion. The stocks will be offered at CNY 17.31per share. In addition, the company has raised CNY 1billion funds through inquiry. Of the CNY 1billion, CNY 500million will be invested on the optical access project in Guangdong Province,CNY 480million will be used to supplement working capital.

Public Information is mainly engaged in the development of fiber access projects inGuangdong. The coverage of fiber access in Guangdong is relatively limited. GuangdongProvincial Government has rolled out plan to add 13.74fiber broadband users between 2015and 2017. As one of the eight companies that will engage in fiber broadband construction,Hangzhou Huaxing Chuangye Communication Technology is expected to gain stronger growthpotential. Public Information has pledged to make earnings of CNY 45million in 2016, CNY 115million in 2017, CNY 157million in 2018and CNY 200million in 2019. Given such, theacquisition of Public Information strongly boosts the company’s earnings.

In addition, the acquisition of Public Information will help create synergy, enabling thecompany’s traditional business including network optimization and network construction tohave more convenient access to Guangdong Market. In addition, by leveraging resources gainedform the acquisition, the company is able to take the lead in business expansion across thenation.

The acquisition of BIH pays way for the company to enter the IDC market. Its cooperation withTencent on cloud computing will definitely become a highlight in the future. In September 2015,the company acquired 51% stake in BIH, in a bid to venture into the big data market. We expectthe company to fully take over BIH by the end of the year. Concentrating in Beijing, Shanghai,Guangzhou Shenzhen, the IDC businesses have supplied 2,600cabinets in 2015and plan tomanufacture 5,000cabinets in 2016. BIH pledged to make net profit of CNY 33million in 2016and CNY 45million in 2017. We expect the IDC business to register explosive growth. Inaddition, jith as signed contract with Tencent regarding private cloud businesses. BIH enjoys richBGP resources in Beijing, Shanghai and Shenzhen, boasting strengths in direct networkconnections. It is able to provide diversified, value-added IDC businesses and is expected tocarry out more M&As based on big data.

The traditional business is expected to grow steadily thanks to the increasing industryconcentration and the lagging effect of 4G network construction. 2014and 2015witnessed 4Gnetwork construction boom. The network optimization cycle generally lags behind the networkconstruction cycle. In this respect, the network optimization industry will continue booming thisyear. At the same time, the company has improved its telecom technology service capabilitythrong acquisition, underpinning a solid foundation for the company to become an industryleader.

The company is making active preparation for the new businesses, With commercialapplications of carrier aggregation and VOLTE technologies expanding, the company will becapable for providing optimized one-stop solutions to operators and equipment supplierscovering LTE network technologies. W3e believe the company will keep focusing on the futureprospects of M-M telecommunication, as well as how online information transmission shouldbe upgraded to in face of increasing popularity of VR.

The issuance of dividends is indicative of the company’s strong growth prospects. Calculatedwith capital stock of 214million shares, the company has decided to offer CNY 0.52cashdividend for every ten shares and offer 10capitalization stocks for every ten shares. Thecompany has specified June 2as date of record and June 3as ex-dividend date.

Earnings Forecast and Investment Recommendations: We estimate the company’s net profit toreach CNY 200million in 2016, CNY 290million in 2017and CNY 350million in 2018, implying46X 16E PE, 31x 17E PE and 26x 18E PE. The EPS was forecasted at CNY 0.73in 2016, CNY 1.06in 2017and CNY 1.3in 2018. Reiterate OUTPERFORM.

Potential Risk: Possible industry decline, slower-than-expected M&A pace