AsiaInfo's interim results review: 2H22 profitability is expected to improve after the epidemic stabilizes

As the company's traditional operator business and enterprise cloud business are dependent on on-site implementation and delivery, 1H22 epidemic affected the project delivery schedule and delayed revenue recognition, so the company's overall profitability performance was weak, with gross margin and net profit margin declining by 2.8/4.1 percentage points YoY. Everbright Securities expects that as the epidemic in 2H22 weakens, the company's BSS business will resume positive growth, and the three new businesses will maintain high growth. Coupled with the recovery of profitability brought by the improvement of project delivery efficiency, the company's net profit attributable to the mother is expected to achieve double-digit growth in FY22.

As the company's traditional operator business BSS and OSS revenue is highly correlated with the operators' capex and opex investment, the related revenue growth will weaken as the operators' 5G construction enters the later stage. The company's operator business is expected to maintain low single-digit growth in the later stage, and the growth driver mainly comes from the relatively late developed OSS business.

In the future, the company will rely on two new business types, vertical industry/enterprise cloud and DSaaS digital operation, to expand non-operator market customers and open up new market space. The company's 1H22 revenue from vertical industry/enterprise cloud and DSaaS business are ￥270M/480M, up 140%/57% YoY, respectively, and the proportion of revenue expands to 9%/16%. Benefiting from the overall rapid growth of China's cloud computing industry and the development dividend of the digital economy, the company binds the operator DICT strategy to expand together. The cloud business is expected to achieve high growth. Everbright Securities expects that DSaaS business, vertical industry/enterprise on cloud business revenue 21-25E CAGR is 31%/51%, respectively, and the revenue share is expected to expand to 20%/21% in 2025.