Inspur Information (000977) Company Comment: INTELQ4 Earnings Exceeds Expectation, Server Industry Recovery Signal Is More Certain

Inspur Information (000977) Company Comment: INTELQ4 Earnings Exceeds Expectation, Server Industry Recovery Signal Is More Certain

Event: The fourth-quarter 2019 financial report initially announced at the beginning of the year exceeded market expectations: fourth-quarter revenue was $ 20.2 billion, and market expectations were 192.

$ 200 million; adjusted expected earnings are 1.

52 dollars, the market expected 1.

25 US dollars; net profit of 6.9 billion US dollars, market expectations of 54.

$ 9.8 billion.

Intel’s fourth-quarter 2019 financial report exceeded expectations, mainly driven by demand from cloud service vendors.

The main reason for Intel ‘s fourth-quarter 2019 earnings growth was higher than expected: server CPUs and data center group (DCG) revenues that provided related products grew 19% in the fourth quarter to 72.

1.3 billion US dollars, exceeding the market expectation of 6.4 billion US dollars.

Among them, in the fourth quarter, DCG’s revenue for cloud service providers increased by 48%, while Q3’s revenue was only 3%; revenue for telecommunication service providers also increased by 14%; other non-CPU products (such as serial chip, ASIC and silicon photonicsTransceiver) sales also increased by 32%, compared with Q3’s only 12%.

Amazon, Intel, and Tencent Cloud earnings have improved significantly and Gartner predicts that there is an existing recovery signal in the global server market.

According to the financial report, in the third quarter of 2019, Amazon’s single quarter capital expenditure increased by 34% year-on-year and 28% month-on-month, which was a significant improvement from the previous quarter (-10% and -3%, respectively).

The 2019Q3 and 2019Q4 Intel financial reports show that DCG Group revenue exceeded expectations for two consecutive quarters.

Amazon is the global leader in cloud computing as AWS, and Intel is a mainstream x86 server chip architecture integration vendor. The significant improvement in the financial results of some leading companies indicates a recovery in global cloud computing.

Domestically, Tencent’s capital expenditure in Q3 2019 increased by 52.

04%, compared with -3 in the previous quarter.

20%, also achieved significant recovery.

In addition, Gartner previously predicted that the global server market is expected to recover in 2020, driven by the construction of new IT infrastructure such as cloud and AI.

The industry is under pressure in 2019 and may meet the turning point of demand in 2020.

1) The scale of Internet vendors has decreased by more than 50%. Benefiting from global cloud computing trends, large-scale 5G applications, AI computing power requirements, and the update cycle of servers and Intel CPU chips, there is a high probability of demand explosion in 2020, of which only the addition of AI serversThe demand will reach 200 ppm.

2) Operators account for more than 50% of the IDC market. Benefiting from the cloud trend and 5G driving network traffic surge, the construction of large data centers has increased (especially China Mobile), and there is a high probability that demand will erupt in 2020.

3) Enterprise cloud and government affairs cloud generate long-term demand for more than ten years. Driven by policies, demand growth is relatively stable.

Although the global and domestic server industries are under pressure in 2019, the industry is expected to meet demand inflection points in 2020.

The rights issue application was approved, and gradually suppressing factors were gradually digested.

1) On January 16, 2020, the company’s application for share placement was approved by the China Securities Regulatory Commission, and the approval was valid for 6 months from the date of approval of the issuance.

2) According to the previous announcement, the budget of the fundraising for the rights issue (including issuance expenses) does not exceed RMB 2 billion. After deducting the issuance expenses, all the funds are used to repay bank loans and supplement working capital.

3) The rights issue will be based on 1 for every 10 shares.

The ratio of 2 shares is placed to all shareholders.

The announcement approved the company’s placing of 154,710,260 new shares to the original shareholders.

Maintain “Buy” rating.

Based on key assumptions and 2019 performance forecast, operating income is expected to be 539 in 2019-2021.

70 billion, 701.

01 billion and 875.

7.1 billion, the net profit attributable to mothers is expected to be 8 in 2019-2021.

6.8 billion, 13.

9.7 佛山桑拿网 billion and 17.

25 billion.

Maintain “Buy” rating.
Risk reminders: growing demand in downstream industries; increased competition in the server industry; escalating trade frictions; and risk of bad debts.