Starnet Ruijie (002396): Cloud service provider core supplier white-label switch + desktop cloud advantage obviously helps the company leapfrog growth

Starnet Ruijie (002396): Cloud service provider core supplier white-label switch + desktop cloud advantage obviously helps the company leapfrog growth

Core points: 1.

A leading domestic ICT application solution provider, diversified businesses promote the growth of enterprises.

  Starnet Ruijie has been committed to providing network infrastructure and solutions for enterprises and government departments for many years.

The company’s business mainly covers network, cloud computing, payment, and video information applications.

At present, the company has completed the transition from a Chinese-foreign joint venture to a wholly state-owned holding, and corporate governance has become clearer.

In the future, relying on the two core businesses of switches and slimming, the company will enter the harvest period of the cloud computing market and continue to benefit from domestic independent innovation dividends, ushering in a new round of continuous growth.

  2.

With the advent of the 5G era, enterprises are going to the cloud, SDN technology applications are overlapping, and the demand for white-labelization is increasing. The domestic cloud market supply chain layout is reshaping. The “white-brand switch” helps the company achieve leapfrog growth.

1) With the advent of the 5G era, data will be more migrated to the cloud. It is the general trend for enterprises to go to the cloud, and the size of the cloud market will continue to grow.

The demand for enterprise network equipment will be more concentrated on cloud customers. The current cloud computing penetration rate is about 10%, which is still low. It is expected that the growth rate of the cloud market will remain at about 20% in the next few years, and the growth rate of the cloud customer market will far exceedThe overall market growth rate; 2) Due to high-density computing and storage requirements of cloud vendors’ data centers, the architecture design has changed in recent years, and at the same time, the application of SDN and NFV technologies has transformed the demand for cloud vendor network 武汉夜网论坛 equipment customization.Because of its ease of deployment and low cost, white-brand switches will become a new trend in cloud vendor equipment procurement.

In addition, due to the monopoly of cloud vendors, their demand is relatively concentrated.

At the same time, cloud vendors themselves are capital-intensive industries and have certain access conditions for their own suppliers. This will lead to a small number of core vendors of large cloud vendors. The cloud vendor supply chain layout is expected to reshape and the company is expected to fullyLeverage its advantages in the field of white-brand switches to increase its market share; 3) The company has become a domestic cloud service giant Alibaba Cloud, a core supplier of mobile cloud, with certain first-mover advantages, stable customer relationships, and market prospectsbroad.

Therefore, we believe that the entire cloud market has a high probability of future growth, and its subsidiary Ruijie Networks is expected to become a reshaping of the cloud market supply chain layout, rapidly increase its share in the overall market, achieve leapfrog growth, and become a domestic mansion.

  3.

The “thin and weak + cloud desktop” overall solution leads the industry, has obvious advantages in independent innovation, and supports remote office. The future growth prospects are promising.

1) According to IDC data, the overall restructuring volume of the Chinese slimming market increased by 17 in 2018.

8%, the advantages of security, cost, operation and maintenance through slimming gradually appear, compared with traditional PCs, there is a clear replacement trend, at the same time, benefiting from the influence of remote office trends, in the next few years, the “slimming + cloud” desktop “marketMaintaining rapid growth, we are optimistic about the company’s leading advantages in this field, and the market prospects are bright; 2) As a leading domestic “slimming + cloud desktop” service provider, it has already cooperated with Huawei, Loongson, Miocore, Feiteng and other domesticExcellent national brands maintain in-depth cooperation and jointly launch domestically produced alternative products targeted at government, finance, education and other fields, which will continue to benefit from independent innovation dividends.

  Investment rating and estimation: We expect the company’s net profit for 2019-2021 to be 6, respectively.

10 billion, 8.

1.6 billion and 10.

3.9 billion, with EPS of 1.

05 yuan / 1.

40 yuan / 1.

78 yuan, the corresponding PE is 37.

17/27.

81/21.

83. With reference to the evaluation of comparable listed companies and the company’s future advantages in replacing switches and desktop cloud services, it will further enhance the company’s performance and give it a “recommended” investment rating.

  Risk reminders: Risks of cloud computing-related business developing less than expected; risks of desktop cloud market penetration falling short of expectations; risks of intensified market competition; other subsidiaries’ performance worse than expected risks.