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机构：中金公司
研究员：Delin ZHUO/Zhonghai YU/Shuyun CHE
Glodon has announced its 2021 results: Revenue rose 40.92% YoY to Rmb5.56bn and net profit attributable to shareholders grew 100% YoY to Rmb661mn. The firm's 2021 results are in line with our expectation.
Trends to watch Revenue from the cost estimation business slightly exceeds our forecast. Revenue from the cost estimation business rose 36.6% YoY to Rmb3.81bn （up 27.90% YoY if considering the difference of cloud contract debts）， exceeding our forecast. Specifically, revenue from pricing, computation, and engineering information rose 63.3%, 61.2%, and 49.0% YoY. Glodon signed Rmb3.1bn new cloud contracts, close to our forecast.
Meanwhile, non-cloud cost estimation revenue rose 7% YoY to Rmb1.25bn, higher than our forecast. We think this is due to the growing e-government business. Gross margin of the cost estimation business declined 1.8ppt YoY due to a rising proportion of e-government business.
Digital construction solution business growing steadily; top-tier clients' purchasing amount increasing notably. Revenue from the digital construction solution business increased 27.8% YoY to Rmb1.21bn in 2021 and rose 26.7% YoY in 4Q21. The firm added 16,000 new projects in 2021, maintaining steady growth. Gross margin of the construction business declined 6.3ppt YoY in 2021, but improved QoQ in 4Q21. We attribute a QoQ rise in GM to the following factors. Frist, the proportion of software and hardware integrated products in the firm's engineering business increased in 2021. Second, products that contain a high proportion of corporate-level platform software and other software were mostly delivered in 4Q21. Glodon is focusing on large-scale procurement.
Specifically, large-scale procurement accounted for more than 50% of service and material orders in 2021. Revenue from offerings to top-5 customers increased 211% YoY to Rmb203mn in 2021.
Design and other innovative businesses record notable revenue growth; expense control effective; cash flow remains strong. In 2021, revenue from the design business rose 250% YoY, thanks to the financial consolidation of Hongye Technology. Meanwhile, revenue from other innovative businesses soared 815% YoY, thanks to the “digital city” project （a project promoting city infrastructure digital transformation）。
Correspondingly, the proportion of outsourcing costs rose, resulting in a decline in gross margin. In 2021, the firm's selling, G&A, and R&D expense ratios dropped 4.3ppt, 3.5ppt, and 5.4ppt YoY, with pay per employee increasing 5.7% YoY, reflecting effective cost control. Excluding the impact from the financial business, net operating cash flow rose 8.57% YoY to Rmb1.65bn. Cash flow remained solid, slightly exceeding our previous estimate.
We expect in 2022, the firm's cost estimation business will maintain steady growth; large-scale engineering projects to continue increasing. We think that the price estimate business will increase nearly 20% in 2022, thanks to benefits from the shift to the cloud. We estimate that new engineering orders doubled YoY in 2021, and may continue to increase rapidly in 2022. We expect large engineering projects to increase.
The firm has rolled out digital construction design products. It may launch integrated design, price estimation and engineering solutions, and create synergies between these businesses going forward.
Financials and valuation
We keep our 2022 and 2023 earnings forecasts roughly unchanged at Rmb993mn and Rmb1.38bn, with a YoY growth of 50.2% and 38.7%. The stock is trading at 57.1x 2022e P/E. Given a lower sector valuation, we shift to the SOTP valuation methodology and cur our target price 20.5% to Rmb70. Our TP implies 84.3x 2022e P/E, offering 46.9% upside. Maintain OUTPERFORM.
Risks
Performance of downstream industries, development of digital construction solution business and promotion of design solution products fall short of expectations.