研究报告全文：MN31Mar2023CMBInternationalGlobalMarketsEquityResearchCompanyUpdateChinasoft354HKOnaslowroadtorecoveryChinasoftdeliveredaweaksetofFY22resultswithrevenueofRMB200bnTargetPriceHK6089YoYandnetprofitofRMB759mn-33YoYmainlyduetoGPMerosionPreviousTPHK914-37pptsto230despitebetteropexcontrolopex-2YoYWethinktheUpDownside195roadtorecoverywillbeslowbut1lowerrelianceonHuawei49ofFY22CurrentPriceHK509revenuevs54inFY212continuedworkforcerestructuring-11YoYinChinaSoftwareITServicesFY22willhelpmarginrecoveryKeycatalystbeingHuaweisnewproductlaunchrelatedtoMetaERPandPangulargeAImodelMaintainBUYMarleyNGAN85239163719FY22missedonGPMerosionbutopexcontrolbetterthanfearedmarleyngancmbicomhkChinasoftdeliveredmoderaterevenuegrowthof9YoYtoRMB200bninFY22Netprofitwasdown33YoYtoRMB759mnmissingourBowenLIconsensusestimatesby3537respectivelyIntermsofrevenuemix85237618957Cloudintelligentservicesgrewat24YoYtoRMB662bnwhiletraditionallibowencmbicomhkITservicebusinesswasupmerely2YoYtoRMB134bnGPMremainedStockDataunderpressuredown37pctptsYoYto230mainlydueto1COVID-19MktCapHKmn154075and2extrastaffcostsrelatedtodemandfluctuationsfromHuaweiAvg3mthstoHKmn1526Meanwhileopexcontrolwasbetterthanexpected-2YoYtoRMB4bn52wHighLowHK817483TotalIssuedSharesmn30270On-goingcustomerdiversificationsinceHuaweibusinessfacesSourceFactSetheadwindsAswehighlightedearlierUSexportrestrictionshaveaffectedShareholdingStructureHuaweisproductdevelopmentroadmapaswellasrevenueandmargintoChenYuhong-Chairman108ChinasoftHuaweisrevenuecontributiontoChinasoftdecreasedto49inUBSGroupAG90FY22vs54inFY21andweexpectittodeclinefurtherto35inFY25ESourceHKExwiththeramp-upofSOEcustomerssuchasChinaMobilerevenue25SharePerformanceYoYinFY22andChinaTelecom39YoYAbsoluteRelativeFY23EfocusonprofitabilityandcashflowimprovementChinasoft1-mth-96-1193-mth-250-270highlightedintheresultsconferencecallthatprofitabilityandcashflow6-mth54-106managementwillbethefocusinFY23EChinasofthas82140employeesSourceFactSetinFY22-11YoYandweexpectworkforcerestructuringtocontinue-3YoYto80kbyendofFY23ELoweropexwillhelpnetmarginrecoverto12-mthPricePerformance43inFY23Evs38inFY22implying20YoYinnetprofitMaintainBUYWecutFY23-24Enetprofitforecastby34-37toreflect1slowtop-linerecoverypostCOVID-19and2loweropexratioMaintainBUYwithnewtargetpriceofHK608priorHK914basedonunchanged15xFY24EPEWethinkgradualimprovementinnetmarginwilldrivere-ratingKeycatalystisHuaweisnewproductlaunchrelatedtoMetaERPandPanguSourceFactSetlargeAImodelasChinasoftprovidesITservicestoassistHuaweiinnewproductdevelopmentRelatedReportsEarningsSummary1ChinaSoftwareITServicesYE31DecFY21AFY22AFY23EFY24EFY25EImplicationsofHuaweiMetaERP20Mar2023linkRevenueRMBmn1839820005210692326425888YoYgrowth30587531041132Chinasoft354HKUSisNetprofitRMBmn11369759490991099513774reviewingHuaweiexportlicensepolicy2Mar2023linkDilutedEPSRMB036025029036045YoYgrowth1293181982082533Chinasoft354HKBenefitingfromlocalizationtrendwithConsensusEPSRMB036025049061naKaihongOS11Jan2023linkPEx124182152126100EVSalesx0505030302Yield0309050608ROE11264738294Netgearing312254475480486SourceCompanydataBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk31Mar2023FocusChartsFigure1RevenueandgrowthFigure2Revenuemix2022RMBmn250004540Cloud2000035smart30business1500033252010000TraditionalIT15outsourcing50001067500201120132015201720192021RevenueYoYSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesFigure3CustomerbreakdownFY22Figure4Margins3530Others253620Huawei4915105Alibaba20PingAnTencentHSBCHonor2011201320152017201920212461GPMOPMNPMSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMFigure5ForwardrevenueandemployeesFigure6RevenueoperatingprofitperemployeeRmb60300000160005014000250000401200020000030100002015000080001060001000000400020112012201320142015201620172018201920202021202250000-102000-200-201120132015201720192021EmployeesYoY1-yearfwdrevenueYoYRevenueemployeeLHSOPemployeeRHSSourceCompanydataCMBIGMSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE231Mar2023FY22resultsreviewRevenuewasatRMB20005mn9YoYbelowourestimatesby-4andconsensusby-9oCloudintelligentserviceswasup24YoYtoRMB66bnoTraditionalITServiceswasup2YoYtoRMB134bnGrossprofitwasatRMB4600mn-6YoYbelowourestimatesby-9andconsensusby-16Grossmarginwasat230-37pctptsYoYbelowourestimateby-13pctptsandconsensusby-20pctptsoCompanyattributedthedeclineto1TheCOVID-19impact2Increasedone-timecostscausedbyfluctuationsindemandfrommajorcustomersOperatingprofitwasatRMB586mn-26YoYbelowourestimatesby-35andconsensusby-47Operatingmarginwasat29-15pctptsYoYbelowourestimateby-14pctptsandconsensusby-22pctptsNetprofitwasatRMB759mn-33YoYbelowourestimatesby-35andconsensusby-37EPSwasatRMB026-36YoYFigure7FY22resultsreview354HK202120222022versus2022versusRMBmnActualActualYoYCMBICMBIConsensusConsensusRevenue1839820005920865-421947-9Grossprofit49044600-65062-95481-16GPM267230-37pctpts243-13pctpts250-2pctptsOperatingprofit796586-26897-351111-47OPM4329-15pctpts43-14pctpts51-22pctptsPBT1252830-341248-331336-38Tax11571-3878-9132-46Netincome1137759-331171-351205-37NPM6238-24pctpts56-19pctpts55-17pctptsEPSRMBcents409261-36387-33408-36SourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE331Mar2023EarningsrevisionFigure8Earningsrevision2023E2024ERMBmnNewOldDiffNewOldDiffSales2106924436-142326427773-16Grossprofit45645760-2148626688-27OPProfit7151175-399101372-34PBT10061557-3512191812-33Netprofit9101435-3711001674-34EPSRMB030047-37036055-34MarginsGM217236-191bps209241-318bpsOPM3448-141bps3949-103bpsPBTmargin4864-160bps5265-129bpsNetmargin4359-155bps4760-130bpsSourceCompanydataCMBIGMestimatesFigure9CMBIestimatesvsconsensus2023E2024ERMBmnCMBIStreetDiffCMBIStreetDiffSales2106926529-212326431754-27Grossprofit45646717-3248628225-41OPProfit7151463-519101897-52PBT10061655-3912192063-41Netprofit9101480-3911001815-39EPSRMB030048-37036058-37MarginsGM217253-366bps209259-500bpsOPM3455-212bps3960-206bpsPBTmargin4862-146bps5265-126bpsNetmargin4356-126bps4757-99bpsSourceCompanydataCMBIGMestimatesBloombergPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE431Mar2023OperatingmodelFigure10OperatingmodelRMBmn202120222023E2024E2025ERevenues1839820005210692326425888Costofsales1349415405165041840120521GrossProfit49044600456448625367Grossmargin267230217209207RD12491238140815241676SGA26992632259528953241OperatingIncome7965867159101189Operatingmargin4329343946Non-OperatingIncome456244291309340ProfitBeforeTax1252830100612191529Incometaxexpensegain1157196120152Minorities01000NetIncometoShareholders113775991011001377Netmargin6238434753EPSRMB037025030036046FullydilutedEPSRMB036025029036045RevenuebreakdownIToutsourcing1306313387137891489216679Emergingcloudbusiness53356618728083729209Huawei98829827933592429150HSBC11801159127414021542Tencent706697766843927Alibaba590467514565622PingAn550490538592652Others5490736686401061912996GrowthYoYRevenues30951011Grossprofit19-6-1710OperatingIncome-16-26222731EPS13-32202125SourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE531Mar2023Figure11Semi-annualoperatingmodelRMBmn1H202H201H212H211H222H22Revenues60598042834110057100259980GrossProfit164924692294261024822118Operatingprofit421531423374485101Netprofitloss401554518619572188EPSRMB016019019020020006MarginsGrossmargin272307275260248212Operatingmargin696651374810Netmargin666962625719GrowthHoHRevenues-73342100GrossProfit-1850-714-5-15Operatingprofit526-20-1230-79Netprofitloss238-620-8-67GrowthYoYRevenues924382520-1GrossProfit5223968-19Operatingprofit-1320-3015-73Netprofitloss1141291210-70SourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE631Mar2023ValuationChinasoft354HKBUYTPHK608MaintainBUYwithnewtargetpriceofHK608priorHK914basedonunchanged15xfullydilutedFY24EPEin-linewith3-yearmeanFigure12PeersvaluationSalesEPSMkCapPriceTPPEROECAGRCAGRCompanyTickerRatingUSmnLCLCFY23EFY24EFY23EFY24EFY21-24FY21-24Chinasoft354HKBUY1963509608152126738280iSoftStone301236CHNR43414700NA1731331661752327DigitalChina000034CHNR29403023NA166140156159880InfosysINFOINNR69791138355NA2352033213451814TataConsultancyTCSINNR139653313890NA2712384474651515Mean1991682332451427Median1731401661751515SourceBloombergCMBIGMFigure1312MforwardPEbandFigure1412MforwardPBbandxHK4530402535302025152010151055--Jul-21Jul-20Jul-22Jan-21Jan-22Jan-23Mar-20Mar-21Mar-22Sep-22Sep-20Nov-20Sep-21Nov-21Nov-22May-20May-21May-22Jul-20Jul-21Jul-22Jan-21Jan-22Jan-23Mar-21Mar-20Mar-22Sep-20Nov-20Sep-21Nov-21Sep-22Nov-22May-20May-22May-21ClosingPx69x156x1-yrfwdPEMeanMean1SDMean-1SD244x331x418xSourceCompanydataCMBIGMSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE731Mar2023FinancialSummaryINCOMESTATEMENT2020A2021A2022A2023E2024E2025EYE31DecRMBmnRevenue141011839820005210692326425888Costofgoodssold99831349415405165041840120521Grossprofit411849044600456448625367Operatingexpenses316741084014384939524178Sellingexpense72994394992410201135Adminexpense130217561683167118752106RDexpense93012491238140815241676Others205159145153467739Operatingprofit9527965867159101189Interestexpense151100113113142155Others235555357404450494Pre-taxprofit10351252830100612191529Incometax871157196120152Minorityinterest701000Netprofit955113775991011001377BALANCESHEET2020A2021A2022A2023E2024E2025EYE31DecRMBmnCurrentassets103941352013601163251770419428Cashequivalents3787555650058981973510683Restrictedcash458058946157528357156277Othercurrentassets202720692439206122542468Non-currentassets269333833364211622142305PPE858122011196193237Intangibles10861037112410661010957Othernon-currentassets74911261111111111111111Totalassets130871690216965184411991821733Currentliabilities271839863553447248685331Short-termborrowings368917766194920892263Accountpayables175322522043226725022763Othercurrentliabilities597817744256277305Non-currentliabilities15921290127799210551133Long-termborrowings1421102111628789411019Othernon-currentliabilities171269114114114114Totalliabilities431152764830546459236464Sharecapital132139137137137137Capitalsurplus473562946014601460146014Retainedearnings449257606498733983579632Otherreserves605589539539539539Totalshareholdersequity87531160412110129511396915245Minorityinterest232325252525Totalequityandliabilities130871690216965184411991821733PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE831Mar2023CASHFLOW2020A2021A2022A2023E2024E2025EYE31DecRMBmnOperatingProfitbeforetaxation10351252830100612191529Depreciationamortization1702211333905159Taxpaid83207196120152Changeinworkingcapital533887766869368488Others564396367000Netcashfromoperations115396216931869782948InvestingCapitalexpenditure159287150150150150Others322421000695653Netcashfrominvesting1925301150219206203FinancingDividendpaid52701546881102Netborrowings21717310898203252Others1961274893000Netcashfromfinancing36213771057830122150NetchangeincashCashatthebeginningoftheyear252637875556500589819735Exchangedifference62403714955653Cashattheendoftheyear3787555650058981973510683GROWTH2020A2021A2022A2023E2024E2025EYE31DecRevenue1713058753104113Grossprofit149191620865104Operatingprofit151163264220273307Netprofit265191332198208253PROFITABILITY2020A2021A2022A2023E2024E2025EYE31DecGrossprofitmargin292267230217209207Operatingmargin674329343946ReturnonequityROE12511264738294GEARINGLIQUIDITYACTIVITIES2020A2021A2022A2023E2024E2025EYE31DecNetdebttoequityx020303050505Currentratiox383438373636Receivableturnoverdays116911531108903884873Inventoryturnoverdays194424252424Payableturnoverdays734523632601478495VALUATION2020A2021A2022A2023E2024E2025EYE31DecPEdiluted140124182152126100PB162515111009Divyield050309050608EV11521399004104418736466813561170EVSales080505030302SourceCompanydataCMBIGMestimatesNoteThecalculationofnetcashincludesfinancialassetsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE931Mar2023DisclosuresDisclaimersAnalystCertificationTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportinwholeorinpartcertifiesthatwithrespecttothesecuritiesorissuerthattheanalystcoveredinthisreport1alloftheviewsexpressedaccuratelyreflecthisorherpersonalviewsaboutthesubjectsecuritiesorissuerand2nopartofhisorhercompensationwasisorwillbedirectlyorindirectlyrelatedtothespecificviewsexpressedbythatanalystinthisreportBesidestheanalystconfirmsthatneithertheanalystnorhisherassociatesasdefinedinthecodeofconductissuedbyTheHongKongSecuritiesandFuturesCommission1havedealtinortradedinthestockscoveredinthisresearchreportwithin30calendardayspriortothedateofissueofthisreport2willdealinortradeinthestockscoveredinthisresearchreport3businessdaysafterthedateofissueofthisreport3serveasanofficerofanyoftheHongKonglistedcompaniescoveredinthisreportand4haveanyfinancialinterestsintheHongKonglistedcompaniescoveredinthisreportCMBIGMRatingsBUYStockwithpotentialreturnofover15overnext12monthsHOLDStockwithpotentialreturnof15to-10overnext12monthsSELLStockwithpotentiallossofover10overnext12monthsNOTRATEDStockisnotratedbyCMBIGMOUTPERFORMIndustryexpectedtooutperformtherelevantbroadmarketbenchmarkovernext12monthsMARKET-PERFORMIndustryexpectedtoperformin-linewiththerelevantbroadmarketbenchmarkovernext12monthsUNDERPERFORMIndustryexpectedtounderperformtherelevantbroadmarketbenchmarkovernext12monthsCMBInternationalGlobalMarketsLimitedAddress45FChampionTower3GardenRoadHongKongTel85239000888Fax85239000800CMBInternationalGlobalMarketsLimitedCMBIGMisawhollyownedsubsidiaryofCMBInternationalCapitalCorporationLimitedawhollyownedsubsidiaryofChinaMerchantsBankImportantDisclosuresTherearerisksinvolvedintransactinginanysecuritiesTheinformationcontainedinthisreportmaynotbesuitableforthepurposesofallinvestorsCMBIGMdoesnotprovideindividuallytailoredinvestmentadviceThisreporthasbeenpreparedwithoutregardtotheindividualinvestmentobjectivesfinancialpositionorspecialrequirementsPastperformancehasnoindicationoffutureperformanceandactualeventsmaydiffermateriallyfromthatwhichiscontainedinthereportThevalueofandreturnsfromanyinvestmentsareuncertainandarenotguaranteedandmayfluctuateasaresultoftheirdependenceontheperformanceofunderlyingassetsorothervariablemarketfactorsCMBIGMrecommendsthatinvestorsshouldindependentlyevaluateparticularinvestmentsandstrategiesandencouragesinvestorstoconsultwithaprofessionalfinancialadvisorinordertomaketheirowninvestmentdecisionsThisreportoranyinformationcontainedhereinhavebeenpreparedbytheCMBIGMsolelyforthepurposeofsupplyinginformationtotheclientsofCMBIGMoritsaffiliatestowhomitisdistributedThisreportisnotandshouldnotbeconstruedasanofferorsolicitationtobuyorsellanysecurityoranyinterestinsecuritiesorenterintoanytransactionNeitherCMBIGMnoranyofitsaffiliatesshareholdersagentsconsultantsdirectorsofficersoremployeesshallbeliableforanylossdamageorexpensewhatsoeverwhetherdirectorconsequentialincurredinrelyingontheinformationcontainedinthisreportAnyonemakinguseoftheinformationcontainedinthisreportdoessoentirelyattheirownriskTheinformationandcontentscontainedinthisreportarebasedontheanalysesandinterpretationsofinformationbelievedtobepubliclyavailableandreliableCMBIGMhasexertedeveryeffortinitscapacitytoensurebutnottoguaranteetheiraccuracycompletenesstimelinessorcorrectnessCMBIGMprovidestheinformationadvicesandforecastsonanASISbasisTheinformationandcontentsaresubjecttochangewithoutnoticeCMBIGMmayissueotherpublicationshavinginformationandorconclusionsdifferentfromthisreportThesepublicationsreflectdifferentassumptionpoint-of-viewandanalyticalmethodswhencompilingCMBIGMmaymakeinvestmentdecisionsortakeproprietarypositionsthatareinconsistentwiththerecommendationsorviewsinthisreportCMBIGMmayhaveapositionmakemarketsoractasprincipalorengageintransactionsinsecuritiesofcompaniesreferredtointhisreportforitselfandoronbehalfofitsclientsfromtimetotimeInvestorsshouldassumethatCMBIGMdoesorseekstohaveinvestmentbankingorotherbusinessrelationshipswiththecompaniesinthisreportAsaresultrecipientsshouldbeawarethatCMBIGMmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreportandCMBISwillnotassumeanyresponsibilityinrespectthereofThisreportisfortheuseofintendedrecipientsonlyandthispublicationmaynotbereproducedreprintedsoldredistributedorpublishedinwholeorinpartforanypurposewithoutpriorwrittenconsentofCMBIGMAdditionalinformationonrecommendedsecuritiesisavailableuponrequestForrecipientsofthisdocumentintheUnitedKingdomThisreporthasbeenprovidedonlytopersonsIfallingwithinArticle195oftheFinancialServicesandMarketsAct2000FinancialPromotionOrder2005asamendedfromtimetotimeTheOrderorIIarepersonsfallingwithinArticle492atodHighNetWorthCompaniesUnincorporatedAssociationsetcoftheOrderandmaynotbeprovidedtoanyotherpersonwithoutthepriorwrittenconsentofCMBIGMForrecipientsofthisdocumentintheUnitedStatesCMBIGMisnotaregisteredbroker-dealerintheUnitedStatesAsaresultCMBIGMisnotsubjecttoUSrulesregardingthepreparationofresearchreportsandtheindependenceofresearchanalystsTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportisnotregisteredorqualifiedasaresearchanalystwiththeFinancialIndustryRegulatoryAuthorityFINRATheanalystisnotsubjecttoapplicablerestrictionsunderFINRARulesintendedtoensurethattheanalystisnotaffectedbypotentialconflictsofinterestthatcouldbearuponthereliabilityoftheresearchreportThisreportisintendedfordistributionintheUnitedStatessolelytomajorUSinstitutionalinvestorsasdefinedinRule15a-6undertheUSSecuritiesExchangeActof1934asamendedandmaynotbefurnishedtoanyotherpersonintheUnitedStatesEachmajorUSinstitutionalinvestorthatreceivesacopyofthisreportbyitsacceptancehereofrepresentsandagreesthatitshallnotdistributeorprovidethisreporttoanyotherpersonAnyUSrecipientofthisreportwishingtoeffectanytransactiontobuyorsellsecuritiesbasedontheinformationprovidedinthisreportshoulddosoonlythroughaUS-registeredbroker-dealerForrecipientsofthisdocumentinSingaporeThisreportisdistributedinSingaporebyCMBISingaporePteLimitedCMBISGCompanyRegnNo201731928DanExemptFinancialAdviserasdefinedintheFinancialAdvisersActCap110ofSingaporeandregulatedbytheMonetaryAuthorityofSingaporeCMBISGmaydistributereportsproducedbyitsrespectiveforeignentitiesaffiliatesorotherforeignresearchhousespursuanttoanarrangementunderRegulation32CoftheFinancialAdvisersRegulationsWherethereportisdistributedinSingaporetoapersonwhoisnotanAccreditedInvestorExpertInvestororanInstitutionalInvestorasdefinedintheSecuritiesandFuturesActCap289ofSingaporeCMBISGacceptslegalresponsibilityforthecontentsofthereporttosuchpersonsonlytotheextentrequiredbylawSingaporerecipientsshouldcontactCMBISGat6563504400formattersarisingfromorinconnectionwiththereportPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE10