Thunder Software Technology:Opening up new fronts

金沙国际手机版官网,金沙国际平台网址,金沙国际平台,A leading provider of smart operating system solutions. While mobile chips are headline-grabbing, mobile operating systems play an equally critical part in the mobile Internet industry chain. Thundersoft, a leading provider of smart operating system solutions, enjoys a clear advantage in terms of operating revenues and gross margins compared with its A-share competitors. Moreover, it counts global chip giants Qualcomm and Spreadtrum as its shareholders. The two currently contribute to more than 20% of Thundersoft’s total operating revenue.

Opens up new avenues of growth.Luenmei Quantum, a heat supply specialist,bought out rivals Guohui New Energy and Shenyang Xinbei Thermoelectricin 2015, and in so doing, expandsits heat supply area from 19.8mn sq. m to 40mn sq. mand branchesout into clean and renewable cogenerationand engineering.

    Sustainablegrowth on transformation.To preempt a revenue plateau, Thundersoft launched the Strategic 2.0 initiative in 2012, featuring stand-alone software products and standardized modules and starting to charge customers based on volume instead of projects to unlock smart hardware growth potential and improve gross margins. Smart hardware was responsible for RMB128mn of Thundersoft’s operating revenue in 2016, a massive YoY growth of 373.85%.

    Revenues and profits buoyed byM&A. Heat supply/heat network connection used to account for above 70%/20% of Luenmei Quantum’s annual revenue, which grew at a CAGR of 16.89% from RMB406mn in 2011 to RMB758mn in 2015, and jumped 16% YoY to RMB2.044bn in 2016 after integration of the acquired assets, continuing the momentum into the first three quarters of 2017, up 18.87% YoY at RMB1.338bn.Accordingly,net profit attributable to the parent climbed from RMB82mn in 2011 to RMB177mn in 2015-albeitwithslowing growth-and surged52.00% YoY to RMB699mnin 2016beforefurther leaping56.83% YoY to RMB467mn in 1Q-3Q17, significantly boosted by highmargin new businesses.

    Acquiring into the in-vehicle system industry. Thundersoft bought out APPSYS and Huichi Technology in Apr. 2016 for RMB102.6mn in cash-both are experts in pre-installed IVI systems, and pushed deeper into the in-vehicle system market by taking over Rightware, a world famous producer of in-vehicle digital instrument clusters. Thundersoft’s in-vehicle system business brought in an operating revenue of RMB46.2031mn in 2016, up 68.88% YoY.

    Strong balance sheet.Luenmei Quantumboasts a long-term record of consistent, above-average results, maintaining positive operating revenue/net profit growth ratesduring the 2011-2016period, a rarity in the industry. The company’s 2016gross margin/net profit margin/ROE stood at 46.62%/35.01%/28.17%, far outperforming its peers. Selling/Administrative/Financial/Period expense ratio came in relatively low comparedto its competitors’at 0.04%/6.50%/-5.50%/1.04%for the first three quarters of 2017, exhibiting effective cost control.

    Profitability forecast. We estimate Thundersoft will notch up an operating revenue of RMB1.07bn/1.316bn for FY17/18, corresponding to a net profit of RMB138mn/175mn and EPS of RMB0.35/0.43. Recommend an Outperform rating. Risk factor. Smart hardware partners’ shipments may fall short of expectations.

    Earnings forecast.We estimate Luenmei Quantumto realize operating revenue of RMB2.726bn/3.285bn/3.764bn for 2017-2019, corresponding to RMB902mn/1.133bn/1.281bn in net profit attributable to the parent, and EPS of RMB1.33/1.67/1.88. Initiate coverage withBuy.

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