20211104-招银国际-China_cloud_outlook_mixed_12页_2mb

报告摘要

China Software & IT Services Summary

Core Content

The document provides an analysis of the China cloud market landscape and the financial performance of several key players, including Chinasoft, Kingsoft Cloud, and GDS. It highlights the changing dynamics in the market, the impact of power cuts and policy changes on cloud deployment, and the strategic moves by Huawei, including the potential divestiture of its x86 server business.

Main Points

Market Share Changes

The China IaaS + PaaS market reached US$7.68 billion in 2Q21, a 48.3% YoY increase.
AliCloud and Tencent Cloud continued to lose market share to Huawei Cloud and China Telecom.
- AliCloud's market share dropped to 36.7% (from 40.8% in 2Q20).
- Tencent Cloud's market share declined slightly to 11.1% (from 11.9% in 2Q20).
- Huawei Cloud's market share increased by +2.2% YoY to 10.9%.
- China Telecom's market share rose to 8.6%.
AWS saw a modest increase in market share to 7.7%.

Impact of Power Cuts and Policies

Power cuts and tighter data center policies may slow down cloud deployment and data center expansion.
Cities are imposing stricter energy saving measures, particularly targeting data centers.
IDC expansion and cloud deployment may face delays due to land and energy approvals.

Huawei's Strategic Move

Huawei is in negotiations to sell its x86 server business due to U.S. blacklisting.
The divestiture is expected to be similar to the Honor case, with a government-backed buyer.
The x86 servers can still be sourced from third-party vendors, so the Huawei Cloud business is not expected to be significantly impacted.
The divestiture could help fund Huawei's Kunpeng (ARM-based) ecosystem.
Chinasoft is considered a key beneficiary of Huawei's strategic shift towards software.

Company Ratings and Valuation

Chinasoft is rated BUY with a target price of US$17.5.
Kingsoft Cloud (KC US) is rated BUY with a revised target price of US$35.33 (down from US$43.86).
GDS is rated BUY with a new target price of US$73.01 / HK$70.70 (down from US$74.74 / HK$72.38).
Both stocks are trading 1-SD below their 3-year mean, but no near-term catalyst is expected due to uncertainty in the cloud landscape.

Key Information

Chinasoft

Revenue is projected to grow from RMB 18,166 million in FY21 to RMB 26,825 million in FY23.
Gross profit is expected to increase from RMB 5,339 million to RMB 7,976 million.
Operating profit is projected to grow from RMB 1,076 million to RMB 1,738 million.
Net profit is expected to rise from RMB 1,214 million to RMB 1,810 million.
EV/sales is 1.7x for FY21.
P/E is 23.4x for FY21.
ROE is 13% for FY21.
Sales CAGR is 24% for FY20–FY23.

Kingsoft Cloud (KC US)

Revenue is projected to decline from RMB 9,639 million in FY20 to RMB 9,054 million in FY21.
Gross profit is expected to drop by 25% from RMB 687 million to RMB 518 million.
Operating profit is projected to decline by 9% from RMB -1,360 million to RMB -1,489 million.
Net profit is expected to decline from RMB -1,004 million to RMB -1,135 million.
EV/sales is 3.0x for FY21.
P/E is N/A for FY21.
Sales CAGR is 39% for FY20–FY23.

GDS

Revenue is expected to grow from RMB 7,871 million in FY21 to RMB 12,113 million in FY23.
Gross profit is expected to increase from RMB 2,052 million to RMB 3,433 million.
Operating profit is projected to rise from RMB 819 million to RMB 1,777 million.
Net profit is expected to grow from RMB -989 million to RMB -875 million.
EV/sales is 11.3x for FY21.
P/E is N/A for FY21.
Sales CAGR is 28% for FY20–FY23.

Financial Highlights

Chinasoft

Net cash from operating is expected to grow from RMB 1,138 million in FY21 to RMB 1,224 million in FY23.
Net change in cash is expected to increase from RMB 2,263 million in FY21 to RMB 1,238 million in FY23.
Cash at the end of the year is projected to rise from RMB 5,825 million in FY21 to RMB 8,549 million in FY23.

Kingsoft Cloud

Earnings revisions indicate a decline in revenue and gross profit.
EPS is expected to decrease from RMB -4.51 in FY20 to RMB -5.10 in FY21.
PBT is projected to decrease from RMB -231 million to RMB -116 million in FY21.

GDS

Earnings revisions indicate a decline in net profit.
EPS is expected to decrease from RMB -2.67 in FY20 to RMB -0.69 in FY21.
Net profit (loss) is projected to grow from RMB -989 million in FY21 to RMB -875 million in FY23.

Strategic Implications

The divestiture of Huawei's x86 business is expected to further strengthen its focus on software and cloud services.
Chinasoft is expected to benefit from Huawei's strategic shift, as it continues to provide IT services to Huawei and Honor.
Power cuts and tighter data center policies may slow cloud deployment and IDC expansion.
The cloud landscape is evolving, with Huawei gaining market share and internet cloud providers facing challenges.
Valuation is based on EV/EBITDA for GDS and P/S for Kingsoft Cloud, reflecting operating profitability and market dynamics.

Summary

The report discusses the market share dynamics in the China cloud sector, focusing on AliCloud, Tencent Cloud, Huawei Cloud, and China Telecom. It also highlights the potential impact of power cuts and data center policies on cloud deployment. Huawei is expected to divest its x86 server business, which may support its Kunpeng ecosystem. The financial performance of Chinasoft, Kingsoft Cloud, and GDS is analyzed, with Chinasoft being the preferred investment due to its Huawei cloud exposure and strong financial growth. The valuation of these companies is based on EV/EBITDA and P/S, reflecting market uncertainty and long-term growth trends.