Starnet Ruijie (002396) Comments: Q3 Outstanding Profit Performance, Product Structure Continuously Optimized

Starnet Ruijie (002396) Comments: Q3 Outstanding Profit Performance, Product Structure Continuously Optimized

Core point of view: The company disclosed the forecast for the first three quarters of 2019, and it is expected that the company will realize net profit attributable to its mother in the first three quarters.

63-5.

30,000 yuan, an increase of 15% -25% in ten years, of which Q3 single quarter net profit attributable to mother is expected to reach 3.

05-3.

460,000 yuan, a year-on-year increase of 7% -21%.

The market develops steadily, and the product structure continues to be optimized. From January to September 2019, the company plans to run its business steadily. It will continue to expand the research and development of smart networks, smart clouds, smart finance, smart communications, smart things, smart entertainment, and smart communities.Market development efforts to optimize business layout and product sales structure.

Enterprise-class network equipment: SDN is driving increased demand for white-brand switches.

At present, the role players in the domestic switch market are Huawei, Xinhua III, Cisco, and Ruijie Networks, which focuses on the enterprise network equipment market and ranks second-tier leaders.

As SDN gradually penetrates into the data center network architecture, white-label conversion is expected to usher in incremental demand; the company makes full use of hardware cost-effectiveness to break through, and works steadily with downstream Internet and operator customers, and is expected to usher in more climbs.

Network terminal: domestic alternatives + independent controllable, thinner taps to benefit Subsidiary Shengteng Information is a leading thin and thin supplier in the Asia-Pacific region. The products have a wide range of applications in finance, government, education, medical and other fields, and have established comprehensive sales channels.

Under the industry trend of domestic substitution and independent control, the company’s downstream demand for cloud desktops and smart terminal products has expanded.

南京夜网论坛 Investment suggestion: As the first echelon manufacturer of domestic network equipment, Starnet Ruijie benefits from the industry upgrade driven by SDN and the trend of autonomous and controllable network terminals, and its business is blossoming.

We expect the company’s EPS for 2019-2021 to be 1.

20/1.

42/1.

60 yuan / share, according to the latest closing price of PE is 25.

55/21.

57/19.

11 times.

With reference to the estimated level of companies in the same industry, Starnet Ruijie’s PE valuation for 2019 is 30 times, corresponding to a reasonable value of approximately 36.

00 yuan / share, give the company a “buy” rating.

Risks suggest that diversified business expansion is less than expected, industry competition has intensified, and international trade trends have changed.

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