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. Cloud computing is booming, driving data center infrastructure procurement
.1 Cloud computing is booming, and super-large data centers are rising
According to Gartner data, the global public cloud market size reached US$139.2 billion in 2018, with a compound growth of 28.24% from 2015 to 2018, and the scale is expected to reach US$246.1 billion in 2021; according to CAICT data, the scale of China's public cloud market in 2018 was 32.9 billion yuan, with an annual compound growth rate since 2015 of 55.11%, and the future growth rate is expected to remain at More than 30%, continues to be higher than the global level, and will reach US$90.3 billion in 2021, with a global share increase of 9.19 percentage points to 36.68% in 2018.
data center is the core infrastructure of cloud computing, which houses various IT and network equipment. In order to support large-scale customer access and use, compared with traditional data centers, cloud data center has changed in various aspects such as computing and networking. In terms of
computing resources, cloud computing requires a huge server scale, integrating several or even dozens of traditional-scale data centers to perform centralized data backup, computing and management, in order to achieve the computing power required for cloud services. Google built a distributed data center that can accommodate more than 460,000 servers as early as the end of 2006. According to Cisco data, there will be 628 hyper-large data centers worldwide by 2021, and the number of servers deployed in hyper-large data centers will account for 53% of the proportion. In terms of the network, with the rapid growth of the number of Internet users, the ability to support the rapid development of business has become the core concept of designing and developing network infrastructure, and it is also necessary to ensure that the network architecture is streamlined and easy to manage. Current mainstream cloud computing providers are actively exploring innovative technologies for cloud data center networks to improve the service quality of cloud computing.
Software-defined network SDN began to emerge. SDN used the OpenFlow protocol to separate the router's control plane from the data plane and instead implemented it in software. Without changing the hardware equipment, network administrators use programs to re-plan the network through central control methods, providing a new solution for controlling network traffic and providing a good platform for core network and application innovation.
Google's B4 network is the first WAN network deployment case based on the SDN architecture. The SDN architecture of B4 is divided into three parts: switch hardware layer, site control layer and global control layer, which increases the link layer utilization rate of its WAN from 30% to 40% to more than 90%, with significant results.
.2 Driven by capital expenditure of cloud manufacturers, infrastructure procurement demand is strong
From the perspective of upstream and downstream of the industrial chain, the upstream of cloud computing mainly includes core chips such as chips, memory, and midstream are various servers, switches, storage, security and other equipment. Cloud computing Internet companies are the main purchasers of various equipment, and provide various IT services to all types of customers based on their cloud computing platform. In recent years, cloud computing and Internet companies have continued to increase their capital support, mainly investing in the construction of their data center infrastructure, and their procurement has become the main driving force for the growth of global demand for servers, switches and other equipment.
Cloud computing and Internet manufacturers have experienced multiple quarters of rapid growth in capital, and the growth rate began to slow down in Q3 2018, mainly to digest large-scale purchases in the early stage. By Q3 2019, some manufacturers showed signs of recovery from CAPEX, returning to the growth trend. Amazon capital expenditure in the quarter was US$4.697 billion, a year-on-year increase of 27.45%; Google capital expenditure was US$6.732 billion, a year-on-year increase of 27.45%, and the growth rate continued to rebound.
The dynamic operating data of upstream chip manufacturers and BMC manufacturers further confirms the signal of better industry. In Q3, Intel's cloud department in DCG, the data center business group, resumed growth, and its fourth-quarter performance guidance continued to improve; the year-on-year growth rate of BMC manufacturer Xinhua's monthly operating income began to return to positive in July and continued to rise.
In the domestic market, cloud computing development is relatively lagging behind, and the total expenditure scale of BAT is still smaller than that of overseas peers, but it grows rapidly. Starting from H2 in 2018, domestic demand also entered a downturn. However, in Q3 2019, the year-on-year growth rate of capital expenditure data released by Tencent has begun to return to positive.
Considering that the domestic cloud computing market is still in the development and catching up stage, such as: in Q3 2019, Alibaba's cloud computing business revenue was 9.291 billion yuan, and Amazon, the global cloud computing leader, had revenue from cloud computing business in the quarter, which was more than 6 times the scale of Alibaba Cloud. Therefore, it is a relatively certain event that domestic leading manufacturers' investment has gradually returned to growth in the medium and long term.
At the same time, the business growth rate of domestic second-tier Internet companies is much higher than the BAT level. In H1, Meituan Dianping achieved revenue of 41.9 billion yuan, a year-on-year growth rate of 59%, and Pinduoduo achieved operating revenue of 11.8 billion yuan, a year-on-year increase of 189%. Qutoutiao 's revenue in the first half of the year increased by more than 200%. In addition, the business scale of companies such as ByteDance is also expanding rapidly.
Although the capital expenditure volume of second-tier Internet companies is still smaller than that of BAT, they are in a stage of rapid growth corresponding to their business expansion, and the increase in contribution will gradually begin to appear.
. Under the requirements of scale and competition, cloud data centers are moving towards open white box
Cost pursuit under super large scale:
Overall cost (TCO) of data center construction and operation is divided into fixed capital expenditure CAPEX and operating expenses OPEX. Among them, CAPEX refers to necessary investment and construction in the early stage and reinvestment after a certain period of time, including land acquisition, data center construction projects, IT and network infrastructure procurement, and supporting power distribution, air conditioning, fire protection and security systems.
Operating Expenses OPEX is the actual expense of operating data center equipment every month, mainly including electricity bills, maintenance, personnel expenses, etc. Among them, electricity bills account for about 60% of the operating cost, depending on the PUE level of the data center and the power consumption of various IT network equipment.
Whether from the perspective of CAPEX or OPEX, data centers with hundreds of thousands of servers make cloud computing manufacturers more sensitive to costs and pay special attention to the overall use efficiency of data centers. For example, considering the annual electricity cost, assuming that a data center with an average power consumption of 300W per server is 100,000 servers, the annual power consumption of more than 26 million kWh. If the power consumption per server is reduced by 100W, the power consumption can be saved by nearly about 8.76 million kWh a year, and the electricity bill will also be significantly reduced.
Customization needs driven by competition:
is different from traditional data center users. IT capabilities are the core competitiveness of Internet giants and the lifeblood of their development of upper-level IT applications. Data centers have become the focus of the "arms race" of Internet companies. Therefore, Internet companies tend to embrace open and open source, deeply participate in all aspects of data center construction, including the formulation of open standards, and use various components that meet the standards to build a completely autonomous design system, and are not bound by suppliers.
cloud computing data center 's super-large and competitive characteristics make its infrastructure require high cost-effectiveness, customization, efficient delivery and efficient operation and maintenance. However, traditional infrastructure has weak evolution capabilities, long product development cycle from development to market, and manufacturers are completely closed from software to hardware, resulting in high maintenance challenges and serious manufacturer binding. Cloud manufacturers urgently need open architectures and product supply.
white box has therefore become a trend in the field of cloud computing. The so-called white box is a concept relative to the traditional brand. There is no brand logo on the product. It is generally a product produced by OEM. White box products are decoupled by software and hardware. Compared with brand products, customers need to configure and load the software system themselves. In the past, they lack competitiveness in the traditional customer market. However, in the cloud infrastructure market, the characteristics of white boxes with high cost performance, rapid iteration and customization are increasingly advantageous. At the same time, the open standards promoted by Internet manufacturers have popularized hardware open source technology, and also promoted the popularization of white box products in the cloud infrastructure market. At present, the data centers of mainstream cloud manufacturers in North America have basically realized the white boxing of servers and switches.
The OCP (Open Computing Project) alliance led by Facebook and the ODCC (Open Data Center Committee) alliance advocated by the three domestic BAT giants are accelerating the formulation of corresponding rules for data center standardization. Among them, the OCP Open Compute Project is an open source hardware organization initiated by Facebook in 2011 with Intel, Rackspace, Goldman Sachs and Arista Networks. Its mission is to realize scalable computing through open open source hardware technology, provide efficient server, storage and data center hardware design, and is committed to innovating around the open source contribution of network, server, storage and OpenRack.
At present, OCP has become one of the world's largest hardware open source communities, with 10 technical project teams including data center infrastructure, servers, storage, hardware management, and 5 regional project teams including Europe, mainland China, Japan, South Korea, and Taiwan. Many open standards have been formulated in different fields. The establishment of these open standards organizations has greatly promoted the popularization of hardware open source technology to help the rapid iteration and upgrading of data center technology, and provided cloud manufacturers with effective tools to overall optimize the design of their data centers, thereby reducing TCO. At the OCP Summit held in 2014, FB announced that the open source hardware solution helped FB save $1.2 billion.
. Domestic cloud data center white box is starting, the 100 billion market is to be explored
The number of domestic data centers is in a relatively early stage compared with the volume of overseas mature markets. With the development of cloud computing, there is still huge room for improvement. At the same time, domestic cloud data centers will continue to be white-boxed. We have calculated the potential space for white-boxed domestic data centers. It is expected that the procurement demand for white-box servers and switches can reach more than 100 billion yuan, providing development opportunities for industrial chain companies.
.1 There is still room for improvement in the size and quantity of domestic data centers
In 2018, the overall scale of the global IDC business market reached RMB 625.31 billion, an increase of 23.6% over 2017; the total scale of China's IDC business market reached RMB 122.8 billion, an increase of 29.8% over the previous year, an increase of more than RMB 28 billion over 2017, and the scale is only one-fifth of the global market.
Synergy Research data shows that the number of large data centers operated by super-large suppliers in the world increased by 11% in 2018 and reached 430 by the end of 2018. In terms of geographical distribution, the United States has 40% of major cloud and Internet data centers, followed by China, but its share is only 8%, followed by Japan, the United Kingdom, Australia and Germany, accounting for 22% of the total.
According to Dramexchange data, the number of servers deployed by BAT data centers is much lower than those of overseas Google, Amazon, Microsoft, Facebook and other peers. It can be seen that the size and number of data centers of domestic manufacturers still have a lot of room for improvement. The white boxing practice of domestic cloud data center represented by Alibaba continues to be promoted
due to the current business scale. The white boxing process of domestic cloud data centers lags behind overseas markets, but domestic manufacturers led by Alibaba and Tencent have launched relevant practices and have made significant progress in some fields.
Alibaba has an international infrastructure and a global network, a huge number of servers and a considerable number of new servers added every year. Its white box practice in cloud data centers is ahead of other domestic peers.
data center moves from leasing to large-scale self-built. In terms of data center infrastructure construction and operation, energy costs have become the main part of data center operation expenses, and improving power consumption efficiency is crucial. In the past, Internet companies mainly adopted the leasing method. The advantage of leasing data center space is that it has a fast delivery speed and can be deployed within 5 months; it takes about one year and more early capital expenditures for self-built data centers, but in terms of power supply and heat dissipation, it can be customized according to its own needs, and the later operational expenses will be lower, thereby reducing the total investment cost TCO.
Google, Microsoft and Amazon started building their own data centers very early.Alibaba began to build its own data center around 2016 and has been constantly exploring. For example, the data center established in Zhangbei introduced natural air cooling. At present, Alibaba has planned its own data center base in Ulanqab , Guangzhou Heyuan, Zhangbei, Nantong and Hangzhou.
server white box is deployed maturely. According to the data of the Institute of Information and Communications Technology, through the overall design and deployment of the entire cabinet server, centralized power supply, centralized heat dissipation, unified management, integrated delivery, and modular operation and maintenance, the total investment cost can be reduced by 10%-20%, the deployment efficiency is increased by 20 times, the daily delivery capacity is increased to 10,000 units, the overall energy efficiency is improved by 15%, and the failure rate is reduced by 40%, supporting the application of a large number of new Internet technologies. Alibaba has now matured from the beginning of purchasing servers to self-developing and deploying complete cabinets, server components, chips, etc.
switch white box has started deployment. For data center network, Alibaba has initiated self-development from the underlying transmission to the module, to the upper switch, and even the OS level. Alibaba's fully self-developed data center switch solves the problems of difficult interoperability of equipment models from different manufacturers in the "black box" mode of traditional commercial switches, inconsistent operation and maintenance interface, low degree of automation, and difficult to locate faults; according to network application scenario customization and self-developed data center switches, hardware convergence and cost transparency and controllability are achieved, and integrated software and hardware design is realized through self-developed AliNOS, simplifying operation and maintenance, improving automation, and achieving rapid fault positioning and rapid recovery. Currently, white box switches have begun to be deployed in Alibaba data centers.
.3 trillion data center white box market space is expected
According to IDC data, the domestic market server shipments in 2018 were 3.3043 million units, a year-on-year increase of 26.10%, and sales were US$1.7168 million, a year-on-year increase of 54.13%. We estimate that the Internet industry shipments account for 35%, among which the leading manufacturers (Ali, Tencent, Baidu, JD , ByteDance) accounted for more than 70%, and the growth rate exceeded the industry average.
combined with industry research, we calculated the demand and price of cloud data center servers of leading domestic Internet companies. The total demand remains a steady upward trend, and the unit price fluctuates due to changes in customer structure and product structure in each year. In addition, assuming that the matching ratio between server and switch is 12:1, we expect that the potential space for white-boxing of domestic servers and switches by 2022 can reach 100 billion yuan.
In addition, for the data center construction and operation part, only the Alibaba data center base needs that have been clearly planned are considered. Assuming that Alibaba’s other four data center bases across the country are replicated by Zhangbei’s scale and model, we concluded that after all Alibaba’s self-built data centers are put into production and enter the stable operation stage, the corresponding operating market size is 9 billion yuan. In the medium and long term, if you consider the self-built needs of other giants after the business scale has increased, several times of the market space is worth looking forward to.
4. White box promotes the reconstruction of the industrial chain, and suppliers with high cost-effective and agile delivery are favored by
cloud data center infrastructure moves towards white box, and the traditional industrial chain structure is broken. In the past, ODM manufacturers in the middle and upper reaches of the industrial chain were directly targeted downstream customers and achieved rapid expansion. At the same time, brand manufacturers are also accelerating the trend of open white box, and brand manufacturers represented by Inspur and Arista have thus gained opportunities for growth. Judging from global development experience, the supplier's cost-effectiveness and agile delivery capabilities have become the key to winning the white box competition.
.1 The direct sales share of ODM manufacturers continues to increase
In the past, the supply chain integration was mainly carried out by ODM OEM factories, including material procurement to production and quality inspection, etc. After the product is produced, it is sold to brand manufacturers for further assembly and sales. Brand manufacturers provide design, system software development, and value-added services to customers in different industries. ODM manufacturers do not need to face the specific industry needs of end customers, but are more responsible for production and supply.
In the cloud data center market, customers have excellent IT capabilities and own set of product design and service standards. Standardized products or redundant design and value-added services provided by brand manufacturers to customers in traditional industries are no longer applicable. ODM manufacturers' excellent supply chain integration and manufacturing capabilities are more favored. Judging from the data on the server field shipment, the server share of HP , Dell, IBM / Lenovo has continued to decline since 2011, while the global share of ODM direct shipments has continued to increase, and has increased from 9% in 2014 to 19% in 2018.
Major ODM manufacturers have also established independent departments to serve these cloud computing Internet customers. Taking Taiwanese-funded ODM manufacturer Weiying Technology as an example, Weiying Technology focuses on providing solutions to various cloud infrastructure products and systems to customers such as Microsoft and Facebook. The annual compound growth rate of operating income from 2014 to 2018 was 150.79%, and the compound growth rate of net profit was 188.97%.
During the expansion of scale, due to fierce market competition, Weiying Technology's gross sales profit margin and net profit margin decreased significantly, and its performance stabilized slightly in 2018; operating indicators continued to improve, mainly driven by rapid revenue growth.
2019 H1, the company's gross profit margin was 6.46%, the net profit margin was 3.53%, the accounts receivable turnover rate was 25.82, and the inventory turnover rate was 6.97.
The company's operating cash flow fluctuates greatly, mainly affected by changes in accounts receivable by major customers in each historical year. In terms of investment activities, the company has continued fixed asset investment over the years, and the financing activities are mainly based on the cash inflow of the company's historical loan activities.
Company ROE reached 81% in 2018, mainly because the company's asset turnover rate hit a historical high. At the beginning of 2019, the company was issued and listed, and the debt-to-asset ratio decreased and the turnover rate performance declined, causing the company's ROE in the mid-term 2019 to drop to 20.47%.
Compared with the valuation of companies in the same industry, the company's valuation level is significantly higher than that of brand manufacturers, and is at a high level of ODM manufacturers, second only to Quanda, a leading ODM shipment manufacturer.
Weiying's business focuses on the North American cloud data center computing and storage server market. Compared with other ODM manufacturers' characteristics of scattered customer structure and wide product lines, Weiying's historical operations and market performance can reflect the changes brought about by the demand for cloud data center white box to enterprises.
white box manufacturers have a model of exchanging profit space for scale and growth. On the one hand, entering the white box supply chain of cloud manufacturers will bring about rapid expansion of scale, improve the overall operational efficiency of the company, and enjoy the rapid growth of the industry's dividend ; on the other hand, affected by competitive pressure and strong voice from downstream customers, the profit level of the manufacturer's related businesses is at a low level, and actively developing new products can bring about a certain high profit return.
.2 Brand manufacturers embracing open white boxes emerged as a new force
Driven by the huge market of cloud data centers and the impact of ODM direct sales, brand manufacturers are also actively embracing the trend of white boxes, actively participating in domestic and foreign open standards organizations, and cooperating with cloud manufacturers.
Inspur cooperates with BAT in depth with the JDM model to gain a high share in the domestic cloud computing market. It is a model for the server field to embrace the white-boxing cloud computing data center to gain growth. Dell EMC and Juniper have begun to provide decomposed hardware/software solutions, such as Cisco released switches based on commercial chips, switches products for Nexus 34180YC Ethernet switches and SONiC operating systems, and Arista and Facebook jointly developed switches 7368X4, etc.
network field, Arista network company with open network software systems as its core stands out. Arista is a network company headquartered in Santa Clara, California, USA. The company mainly provides cloud computing network equipment for data centers and focuses on data center Ethernet switches. Its core advantage is its network operating system EOS.
2019 H1, Crehan data shows that Arista's market share in the data center high-speed switch market increased from less than 5% in 2012 to 18.6%, while Cisco further dropped to 37.4%.
Arista In line with the needs of large-scale cloud computing data centers and open infrastructure, the company proposes innovative solutions from both software and hardware. In terms of hardware, unlike switch manufacturers using dedicated chip solutions, its products are built on commercial chips, and their performance can be quickly improved while the cost is relatively low. In terms of
software, the company's network operating system EOS adopts highly modular software design and is a pioneering network operating system that can achieve single image consistency between multiple hardware platforms and achieve uninterrupted service upgrades and application expansion through a modern core architecture, which can provide customers with sufficient customized expansion and management capabilities.
In 2018, the company achieved a main business revenue of US$2.151 billion, with a compound growth rate of 47.77% since 2011; and achieved a net profit of US$390 million, with a compound growth rate of 38.22% since 2011.
At present, the company's revenue mainly comes from the sales of switch products. In 2018, the switch sales revenue was US$1.841 billion, with a gross profit margin of 60.86%, a year-on-year decrease of 2 percentage points, but it remains at a high level. The high gross profit margin is mainly due to the company's switch products being developed based on commercial chips, with high cost efficiency, and the product integrates the company's self-developed EOS software, which is a reflection of the company's core competitiveness. In addition, the company also provides support and after-sales services to customers. In 2018, the company achieved service revenue of US$310 million, a year-on-year increase of 45.41%, and a gross profit margin of 81.50%, an increase of 3 percentage points year-on-year, and its proportion of total revenue increased to 14.42%.
In 2017, the company's ROE reached 30%, showing an upward trend year by year, mainly benefiting from the company's high profitability level. In 2018, it declined significantly due to the impact of relevant litigation costs.
Arista established OCP with Facebook and other manufacturers in 2011. It is an early advocate of the opening of cloud data centers. The company's rapid rise reflects the trend of data center infrastructure opening, and its stock price trend and valuation premium also reflect the recognition of overseas investors.
5. A-share data center white boxing related companies
.1 Inspur Information (000063.SZ)
Inspur Information keenly captured the prospects of industry development in the initial stage of domestic cloud computing, proposed that the JDM model actively cooperated with the product research and development and production needs of cloud computing customers, and led the competitors to complete the initial accumulation of key customer resources and business scale, deeply benefiting from the trend of domestic data center server white box.
combined with JDM model, the company has also built the industry's first intelligent flexible production base. The base has two intelligent flexible production lines and 10 production units operating in parallel. It can produce 10 different cloud server nodes at the same time, and then assemble them in a unified heavy-duty assembly line. At present, the R&D cycle of a new product of Inspur Server has been compressed from 1.5 years to 9 months. Customers can deliver prototypes in as fast as 3 months to demand. In terms of production delivery, Inspur order delivery cycle has been shortened from 15 days to 5-7 days. Previously, the industry's highest delivery deployment speed of 10,000 nodes/day was created in Baidu Yangquan Data Center.
Because in the JDM model, the product is based on the full customization of product services that integrate the industrial chain between the two parties, it greatly improves the company's customer stickiness and becomes a moat for the company to continue to share the high growth dividends of the industry in the future. The company's revenue growth rate in 2017 and 2018 was 101.21% and 84.17%.
The company's market share has steadily increased. Judging from the market share data of domestic x86 server shipments, since Inspur surpassed Dell EMC in Q3 2017, it has firmly ranked first brand in the domestic market, and its global market share has also increased to third. Among them, its market share in the cloud computing Internet industries such as Alibaba, Baidu, and Tencent exceeds 40%, far exceeding competitors such as Dell, , Huawei, and , with a clear leading advantage.
At the same time, the company has made significant breakthroughs in multiple fields such as second-tier Internet, 5G, and AI, helping the company to continue to grow.
Based on static data in 2018, we calculated the company's contribution to the company's revenue and share growth in the government and enterprise industries of second-tier Internet manufacturers and operators.Considering Inspur's leading position in the domestic server market, especially in leading Internet manufacturers, government and enterprises and other existing market share, such as: the company's market share in Alibaba exceeds 50% and its government industry exceeds 20%, so it is highly likely that the company will share at least 30% of the new market, and it will contribute more than 4 billion yuan of revenue, accounting for about 9.45% of the revenue in 2018, and the corresponding market share will increase by 3.98%.
According to the latest global share data of server manufacturers released by IDC, Inspur is the only manufacturer that shipments have maintained year-on-year growth. In the second quarter, the global market share increased to 8.7%, 1.9 percentage points higher than the previous year. The gap with Dell and HP, which were ranked first and second, further narrowed, and the company's share increase was accelerating.
.2 StarNet Ruijie (002369.SZ)
The company's current main business includes six major businesses: enterprise-level network equipment, terminals, payments, video information applications, smart communications and smart communities, and 4G applications. The four major brands of Ruijie Network, Shengteng Information, StarNet Shiyi, and Deming Communication are responsible for the business implementation.
Among them, the enterprise-level network equipment business mainly includes product lines such as switching, wireless, cloud desktop, router, smart classroom, security, IT management, etc. In 2019, H1 contributed 47.38% of the company's revenue and 60.35% of the company's gross profit, and is an important source of revenue and profit for the company.
At present, the company's data center switch has been widely used in Internet companies such as Alibaba, Tencent, Toutiao , Meituan and other Internet companies. With the start and advancement of white-boxing in the domestic cloud data center switch field, the company is expected to obtain large share of supply opportunities and contribute to the increase in performance.
In addition, in the terminal field, the company's thin client products shipped 679,000 units in 2018, accounting for 48.6% of the domestic share, ranking first for 17 consecutive years, and ranked first in the Asia-Pacific market (except Japan) for seven consecutive years. As a leading desktop cloud manufacturer, the company has many domestic chip desktop complete machines, with products covering Loongson , Zhaoxin, Zhongzhixin and other domestic solutions. It has completely independently developed desktop cloud systems and a number of domestic desktop cloud collections and was shortlisted for the 2018 central government procurement list, which is expected to further share the dividends of the growth in demand for domestic cloud desktops.
.3 Data Port (603881.SH)
Data Port Company is one of the leading wholesale data center manufacturers in China, with its main customer bases such as Alibaba, Tencent, and Baidu. As of mid-2019, Data Port Company operated a total of 15 self-built data centers, deployed a total of 10,467 cabinets and 106,992 servers. The company's computer room resources are continuously invested and put on the shelves, driving the revenue and profits to show a stable growth trend over the years.
benefit from the stability and sustainability of the business model, and the company's operating cash flow continues to rise steadily as the revenue scale expands. Over the years, net outflow of cash flow in investment activities has expanded with the company's data center scale, and net inflow of cash flow in financing activities has increased accordingly.
Since 2016, the company and Alibaba Data Center project cooperation has continued to deepen, and have successively delivered and operated projects such as Zhangbei Xiaoertai, HB33, Shenzhen Baolong, and Hangzhou Xishi. In May 2018, the company received a letter of intent for Alibaba on the demand of five data center projects, ZH13, GH13, JN13, NW13, and HB41. The construction of each data center has been steadily progressing in 2019, and signed a memorandum of cooperation with Alibaba that includes the main contract terms and has effective legal effect, which means that the company has locked in the project-related dividends and will sign a formal service agreement after the construction is completed and accepted. With the delivery of the above projects, the number of cabinets operated by the company will expand to more than 30,000, which is a significant increase compared with the current 10,000. By then, Alibaba's demand will account for 70% of the company's cabinet resources.
At the same time, the company has become Alibaba's leading supplier in the field of data center customization, and its cooperation with Alibaba has further strengthened its stickiness. It is expected to continue to expand its scope of cooperation in the future and enjoy the dividends of domestic cloud computing growth.
According to Wind's consistent expectations, as of November 12, 2019, the 2020 valuation level of white box-related targets of A-share data centers: Inspur Information (000977.SZ) dynamic PE is 30 times, StarNet Ruijie (002396.SZ) dynamic PE is 20 times, and Data Port (603881.SH) dynamic PE is 38 times.
(Report source: Western Securities)
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