Xingwang Ruijie (002396) Company Comment: Winning the bid to achieve breakthrough in the high-end market

Xingwang Ruijie (002396) Company Comment: Winning the bid to achieve breakthrough in the high-end market

Event summary: China Mobile announced the centralized procurement of high-end routers and high-end switches from 2019 to 2020 (standard package two, standard package three, standard package five, standard package six). Successful candidates were announced, Huawei, ZTE, Huasan, Ruijie, etc.Shortlisted, Starway Ruijie was awarded 70% and 30% in the two standard packages of high-end Layer 3 switches respectively.

Winning the bid for the collection of mobile routing switches, the operator made a breakthrough in the high-end market.

The products collected this time are high-end routers, BRAS and high-end three-layer switches. The procurement scale is estimated to be 7,425 high-end routers, 107 U-sides of BRAS equipment, 26 sets of C-sides, and 4,662 high-end switches.year.

The forthcoming bid to win the four internal vendors of the supplier, the market’s expected replacement of Ruijie’s tender in the operator, gradually the company mainly in the low-end telecommunications switch market, this company has made a breakthrough in the high-end switch market of China Mobile.

Specifically, only Ruijie and Huawei are short-listed in the high-end switches. Ruijie’s bid price for high-end switch 1 (standard package 5) was 20.06 million (1667 units), accounting for 70%, and high-end switch 2 (standard package 6) was bidding.The price is RMB 19.123 million (the number is 2995 units), the share is 30%, and the total amount is 1.

98 ppm, equivalent to Huawei’s share, reflects the improvement of the company’s product competitiveness and research and development capabilities.

We expect the company to continue to exceed expectations in the switch and cloud terminal markets.

China’s leading government and enterprise network solution provider. Data center switches have been scaled by cloud computing Internet companies.

The subsidiary Ruijie Networks has a complete enterprise-level network product line, covering the entire industrial chain of switches, routers, gateways, firewalls, and wireless. It forms differentiated competition with different brands, such as Cisco, Huawei, and Huasan, in terms of R & D strength and brand influence.The power is initially improved.

The company expanded R & D investment, data center switches, and cloud classroom product lines achieved rapid growth.

Data center switches have been widely applied in Internet companies such as Alibaba, Tencent, Toutiao and Meituan, and actively expand overseas business.

A wholly-owned subsidiary in Malaysia, a wholly-owned subsidiary in Turkey, and a wholly-owned subsidiary in Japan were established overseas.

According to CCW data, Ruijie Networks’ cloud classrooms have a 75% share in the Chinese virtualized computer classroom solution market.

7%, ranking first among competitors with absolute advantage for three consecutive years.

IDC report shows that Ruijie’s Ethernet switches have a market share of 8.
.

4% ranked fourth.

In the future, it is expected that new companies that benchmark the Arista network in the United States will be born. As the leader of domestic second-tier switches, Ruijie Networks will usher in new growth potential.

Shengteng is the first in China to lose weight and desktop cloud, and then discuss the value of thin passenger aircraft.

Why did Dell buy Wyse for $ 1 billion?

We believe that there are two most important points: First, Dell recognizes that weight loss is different from the PC market rules, and patents and channel expenditures require a lot of time revenue; second, in the era of centralized IT architecture, the trend of weight loss to traditional PCs appears.

IDC report shows that in 2018, Shengteng thin replaced 48.

The 6% share ranks first in China, and smart terminals are shortlisted in the six major commercial banks of industry, agriculture, China, construction, transportation, and postal storage.

We believe that thin customers will become an important form of PC terminal in the era of cloud computing. Its advantages of security, low power consumption, flexible deployment, and centralized management are gradually emerging. It has a wide range of applications in the financial, government, education, and medical fields.Already started to replace desktops with thin alternatives.

We predict that the penetration rate of weight loss in the enterprise-level terminal market in the next three years is expected to increase from the current 8% to 15-20%.

Shengtengyun Desktop launched a secure and controllable 天津夜网 domestic cloud desktop solution using Godson, Zhaoxin, Huawei Kunpeng and other domestic chips to meet customer needs. It has won several bids for information procurement projects of central state agencies and has great potential in the Anco market.
Investment suggestion: Starnet Ruijie is one of the top three ICT integrated service providers in the domestic enterprise network market. The switches and cloud terminal services are in the leading position internally. Data center switches have been widely used by cloud computing vendors. Desktop cloud and Huawei have strategic cooperation.Turn on high growth.

The company increased investment in research and development to contribute to cloud computing-related businesses, and will continue to benefit from autonomous and controllable, 5G network cloudification and the development of the cloud computing market.

We expect the company’s net profit for 2019-2021 to be 7, respectively.

24 billion, 9.

1.6 billion and 11.

8.5 billion, with EPS of 1.

24 yuan / 1.

57 yuan / 2.

03 yuan, corresponding to PE = 22 in 2020.

75X, maintain “Buy” investment rating.

Risk Warning: Risks of cloud computing-related business developing less than expected; risk of increased market competition