Donghua Software: The development direction of cloud computing is clear

Announcement of directional additional scheme

June 1, 2012, the Donghua Software announced the 2012 annual private issue of stock plans. The company intends to issue no more than 36.1 million shares to a specific object, the issue price is not less than 19.18 yuan/share, the total amount of funds raised not more than 692 million yuan. Raise funds to three projects: (1) Integrated cloud service platform for small and medium-sized banks, (2) Donghua Software Regional Digital Medical Service information Cloud Platform project, (3) New generation it operation and maintenance management System project.

Key points of support ratings

Cloud computing, the direction of development is clear

Cloud computing is the future direction of the software industry, but also the focus of national policy support areas. The company's investment project focused on highlighting cloud computing, in line with the trend of industrial development. The first two of the three fundraising projects are directly related to cloud computing, respectively, to the financial and healthcare industries of the cloud computing platform. The third project, "a new generation IT Operations Management System Project", develops a novel it operational maintenance support system to provide appropriate it operational services for large IT systems in the cloud/mobile internet age. The company in the cloud computing era strategic layout clear, the direction of development, relying on the company's strong executive power, we believe that the probability of success of the project is larger, more favorable for the long-term development of the company.

Leveraging capital markets, transforming software services

We believe that the company is intended to borrow the capital market, accelerate the development of integrated software service providers. The company has always been a comprehensive solution provider for the development vision. But the company cash is not well-off, in the past years the rapid development of the company's system integration business has consumed the company's cash flow, restricting the company's software development Business and information services business investment. Companies with the help of this issue, to the company in the system integration business has a strong competitive advantage in the field, will accelerate the company to software service manufacturers to transform. It is expected that with the production of investment projects, the company's software and services revenue accounted for increased, thereby significantly increasing the company's ROIC.

Short-term performance may be diluted

This non-public offering is intended to issue 36.1 million shares (the upper limit), accounting for 6.37% of the total share capital after issuance. However, we expect that the investment project will be difficult to contribute enough profits in 2012, so if the issue is completed within the year, it is expected to slightly diluted 12 earnings per share.

Investment advice and ratings

The company is the most outstanding information system providers and service providers, the future growth of the industry space, the non-public offerings will be the company's future high-speed growth escort. If we do not consider the impact of additional dilution, we expect the company 2012-14 net profit growth of 36%, 38% and 37% respectively, earnings per share 1.08, 1.49 and 2.04 yuan. reiterated the Buy rating, the target price of 27.00 yuan, corresponding to 25 times times the 2012 P/E ratio.

Main risk

The issuance plan also needs the shareholder general meeting approval as well as the SFC approval, existence certain uncertainty.

Macroeconomic continues to decline, and domestic IT spending continues to shrink.

(Responsible editor: The good of the Legacy)