Starnet Ruijie (002396): The Rise of ARISTA in China: From Addition to Subtraction

This report reads: The underrated leader of domestic digital communication white card exchanges, the card is located on the front line of domestic IDC switches white card trend.

Development path, market prospects benchmarking Arista, domestic local benchmarking tide information, or Davis double-click will be welcome.

Investment Highlights: Cover for the first time and give an “overweight” rating.

It is predicted that Starnet Ruijie’s net profit attributable to mothers for 2018-2020 will be 5 respectively.

8.1 billion, 7.

26 billion, 9.

08 thousand yuan, EPS is 1.

00 yuan, 1.

24 yuan, 1.

56 yuan.

With reference to comparable estimates and the principle of low EVA, we give the company 28 times PE in 2019, corresponding to a target price of 34.

72 yuan.

Covered for the first time, giving “overweight” rating.
Starnet Ruijie is an underrated domestic leader in datacom white-box switches. With long-term cooperation with BAT / operators, it will multiply the domestic datacom white card wave and rise to China’s “Arista”.

The market underestimates the scope and value of the “National Bank Edition Arista”.

In the field of data communications, white-branding has become a major trend in the industry, but the penetration rate of white-labeling in China is still low. Internet giants and operators will support a switch manufacturer against CT manufacturers just as they support Inspur.

Starnet Ruijie is a long-term partner of British American Tobacco Company and operators. In 2018, it first obtained Alibaba Cloud hardware certification, and 四川耍耍网 in the end of the year, it acquired 70% of the shares in China Mobile related tenders.It is not far away to be unique in the field of domestic white-brand switches.

The company learns to “do subtraction”, focuses on the main business of government and enterprise network equipment, and focuses on creating value.

In the past ten years, the company has established many subsidiaries and business segments to create a battleship in the communications industry with tens of billions of revenue, but the complicated business synergy is not strong.

Since last year, the company has focused on Ruijie Networks as its core business entity to reduce the burden on the company and fuel its development.

In the future, with the further improvement of the capital market system, the company is expected to continue to get rid of the burden, focus on the main business, and create new kinetic energy through mixed reform and activation to build a wider moat.

Catalyst: Cooperation with major Internet giants will be gradually implemented.

Risk reminder: Intensified competition in the industry brings downside risks to margins, 5G commercial advancement fails to meet expectations, and the Sino-U.S. Trade war brings risks of industry uncertainty.