Fujian Star-Net Communication Co. Ltd.

[Kaimin]

The guidance for 2018 EPS is 1.2 yuan  before deducting profit from extraordinary item. The EPS after deducting profit from extraordinary item is 1-1.05 yuan. From the table above, 2017 EPS before  deducting profit from extraordinary item was 0.85. 2017 EPS after deducting profit from extraordinary item was 0.69. Assuming 2018 EPS is 1 yuan after deduction, the organic growth rate will be 44.9%. But if the number is at the higher end of 1.05, the growth rate will be 52.2%.

According to the company, company has not yet gained economy of scale from the sale of high end networking equipments (switches, routers etc..) to operators' data centres this year. This will be reflected as high sales and operating cost for business in this segment. However, as the volume takes off which will definitely take place next year, not only profit will scale proportionately, but  increment of profit will result from the effect of economy of scale. For this year (2018), their sale of high end switches to big data centres is only at 300-400 millions. Unofficial estimates is that this number will reach 1 billion next year, a 200% increase. IDC reports that the growth of data centres in China has been and will be at a 40% annual rate until 2023. Since this company looks like it is increasing market share significantly, the growth rate for this segment of business should be significantly higher than 40% annual rate which is inline with our current estimate for this year result.

Other line of businesses such as WLAN, Virtualisation Desktop, POS etc is likely to maintain at a growth rate of 20-30%. The adoption shift in corporates from PC to virtualisation desktop has barely scratched the surface and the company is on the sweet to benefit from this wave as a leading provider in China and Asia (1st in Asia, 3rd in the world) .

Would like to see some sources for this 40% growth rate, because this gives the rate at 13% from 2016-2020, instead of 40%.

I would also like to see some reports or details about this 200% growth rate, especially how they are going to achieve this 200% growth rate. A company which already has such huge demand for its products and would have its manufacturing utilized to near 100%. Are they opening a huge new plant or plants that will triple their manufacturing output?