1CompanyReport|EarningReviewValuableCapitalEquityResearchContact：YuShekLunjoe.yu@valuable.com.hkPleasereadthedisclaimerattheendofthereportCompanyBackgroundNameAsiaInfoTechSectorSoftwareEstablishmentDate2003-07-15RegisteredCapitalHKD10,000RegisteredAddressB.V.ITotalEmployees13216ChairmanTIANSuningInvestmentRatingBUYTargetPriceHKD16.63ShareholdingStructure(Asof2021-06-30)ShareholderNameShareCITICCapitalHoldingsLimited23.22%ChinaMobile19.78%TIANSuning13.1%KeyDataClosePrice(HKD)12.585dayschange(%)0.1610dayschange(%)-0.325daysmovingavg(HKD)12.6910daysmovingavg(HKD)12.5110daysavgvol(K)347ReportDate：2021-08-26AsiaInfoTech(1675.HK)Stronggrowthinthe“ThreeNew”businesssegmentsPerformanceReviewTherevenuetotaledatRMB6.675billionrepresentsa+8.4%YoYincrease.Traditionalbusinessrevenue,mainlydrivenbyBSS,hasachievedRMB2.109billionora-0.3%YoYdecrease.The"ThreeNew"businessesrevenuetotaledatRMB553millionor140.9%YoYincrease,whichincludeObjectStorageService(OSS)revenueRMB131millionor135.8%YoYincrease,DeepSecurityasaService(DSaaS)revenueRMB309millionor192%YoYincrease,andVerticalIndustriesandEnterprisesCloudification(VIEC)revenueRMB113millionor+65.7%YoYincrease.Grossprofitmarginincreasedfrom35.7%to36.7%YoYandincreasedby+11.6%YoY.Thecompany'snetprofitmarginincreasedfrom9.3%to10.3%YoY,andnetprofitwasRMB280millionora+20.2%YoYincrease.TheBSSbusinesses:Leadingpositionandachievefull-yearpositivegrowthTheBSSbusinessaimstoconsolidateitsexistingscale,improvebusinessefficiency,andachievegrowth.Inthefirsthalfoftheyear,therevenuewasRMB2.109billion,ora0.3%YoYdecrease.Thisdeclinewasmainlyduetodelayinthird-partyprocurementandcontract-signing,whichaffectrevenuerecognition.SincethenewlysignedBSSbusinesshasincreasedbyover10%,therevenueisexpectedtoachievepositivegrowth.TheBSS'sinvestmentfocusisvalue-orientedtosupporttelcooperators'5Gbusinessandemphasizethesmartstation,gridoperation,individual,family,governmentandenterprise,andinnovativeindustry,leadingtocross-sellingwiththe"ThreeNew"businesses.ThetraditionalBSSbusinesshasreachedthematurestagewithlimitedgrowthopportunitiesandexpectingalowsingle-digitgrowthrate.The"ThreeNew"businesses:extensiveexpansionwithsuperiorperformanceinOSSandDSaaS.In2021H1,the"ThreeNew"accountedfor20.4%ofthetotalrevenueandincreased7.4ppcomparedto2020.Thisincreaseisinlinewithourexpectations.Inthefirsthalfoftheyear,theOSSbusinessrevenuewasRMB131million,a140.9%YoYincrease.The5GOSSnetworkintelligentproductsservicingprovincialandGroupleveloperatorscontinuetoexpand,from73in2020tomorethan90inthefirsthalfoftheyear.TheinnovationcapabilityinOSSproductshasbeenwelladaptedtomeetcustomerschangingneeds.Thecomprehensiveproductrangeinthe5GOdomainaccelerates5Gnetworkslicing,CEMcustomerperceptionmanagement,etc.AccordingtotheChinaAcademyofinformationandCommunicationsTechnology(CAICT),theChineseoperatorOSSmarketisexpectedtogrowfromRMB4.4billionin2021toRMB5.5billionin2025,withaCAGRof6.3%.Baseduponthemid-single-digitgrowthassumption,companyleadingpositionintheOSStechnology,andsubstantialproductinfluence,weexpecttheOSSbusinesstogrowby50/40%in2021/2022.TheOSSwillaccountforapproximately7%ofrevenuein2025. 2[Table_Page]ValuableCapitalAugust26,2021ThursTheCAGRfortheperiodbetween2020and2025isestimatedtoreach26.2%Inthefirsthalfofthisyear,therevenueforDsaaShasreachedRMB309million,a192%YoYincrease.Thegrowthengineforthisbusinesssegmentoriginatedfrom1.TheTelco-operatorsincreasingdemandfordigitaltransformation;2.Thegovernmentbodiesdemandtoleveragetheservicetocontrolpandemicsandtosurveythepopulation;3.ThefinancialandautomobilesectorstooperateWechatcorporateaccount.Since2020,theinnovationandapplicationforDSaaSproductscontinuetostrengthen.Coupledwiththeriseofinternettraffic,enterpriseshavefocusedmoreondigitaltransformation.Thecustomerbasehasincreasedfromthepreviousgovernment,post,finance,andtransportationsectors,coveringautomobilesandInternetsectors.ThecompanypartneredwithTencenttojointlyprovidecorporateaccountservicestolargecorporates.ThecompanyhassupportedlargecorporatestoincreasetrafficfromtheTencentecosystemandsuccessfullyincreased6-7timesmoreorderconversionthantraditionalchannels.Theservicetolargeaccountscreatedthepossibilitytotapintoover200millionusersintheTencentecosystemcoveringtelecommunication,broadcasting,financialsectors,etc.TheDSaaSbusinesssegmentcontinuestoinnovatethebusinessmodel.Inourpreviousreport,datedMarch25,2021,highlightedtheresult-pay-chargingmodel.Corporatecustomerspaidvariablemarketingfeesalignedwiththeactualoperatingresultsratherthanafixedmarketingfee.Theinitialresultfromtheresult-pay-chargingmodelisencouraging.Forexample,AsiaInfoTechhassuccessfullyacquiredvariablemarketingfeesexceedingRMBtenmillionfromasinglecorporatecustomer.Weexpectthisbusinessmodeltoreplicateandboostoperatingrevenue.AccordingtoACICT,themarketsizefordigitaltransformationisestimatedtoincreasefromRMB61billionin2021toRMB120billionin2025,representingaCAGRof19%.Government,financeandtelecommunicationsectorstoaccount26%/13%/7%respectively.Basedonthelowdouble-digitgrowthandthecom