Author: American Stock Research Institute

Jin Shanyun

This year, the Internet industry has several more influential split and listing actions. After Netease split Netease Youdao and Jinshan software split Jinshan office, Jinshan software officially announced to the public at the end of the year. Jinshan cloud has submitted the draft registration statement for possible IPO to the SEC on December 20 (New York time). This action revealed the prologue of jinshanyun's listing in the United States.

In the Internet industry, it is not unusual for giants to split up their divisions or subsidiaries, as many "elders" have done before. Sina splits Sina Weibo, Tencent splits its QQ music and ocean music into Tencent music, and Ping an good Doctor, an Internet medical section of Ping an Group of China, goes on the market independently. Jinshan Software split its division twice in a year or caused a high degree of attention, especially Jinshanyun is known as Jinshan Software revenue account.

What is Jinshan software's intention behind the frequent split of its departments? In the global cloud computing industry, many technology giants, such as Amazon, Microsoft, IBM, etc., take advantage of cloud services to bring new growth engines. Can jinshanyun go public in the United States to become one of the top two U.S. cloud giants?

Separation and listing for mutual benefit

Jinshanyun's listing in the US attracted high attention

After the announcement of Jinshan cloud's listing in the United States on December 20, affected by the news, Jinshan software's share price increased in the past two days, rising nearly 4% in early trading. From the perspective of market sentiment, investors are still optimistic about the split action of Jinshan software. However, the intention behind the two-time split of its departments to be listed in two places will attract people's attention. In the eyes of the US Stock Research Institute, Jinshan software still has a lot of actions.

For Jinshan software, the split is actually conducive to reducing some growth pressure of the parent company, and it is expected to drive the overall valuation of the parent company after the division and listing of its departments. In the Internet industry, there are also some companies that perform better after they split up their departments or subsidiaries, which will actually bring higher returns to the parent company. Take Sina for example. Up to now, Sina's share price is $38.45, with a market value of $2674 million. Sina Weibo's share price is $46.25, with a market value of $10408 million.

At the same time, take Jinshan office under Jinshan software as an example. On November 18, n Jinshan was listed at the issue price of 45.86 yuan, which soared at the opening, with a maximum of 215%, and its market value once exceeded 60 billion yuan. As of the publication of the article, the share price of Jinshan office was 157.00 yuan, with a market value of 72.377 billion yuan, up 242% from the initial listing. The successful listing of Jinshan office has set up a good example for Jinshan software. The interests of the team and the company can be more deeply bound to solve the problem of large companies.

Similarly, if we put it on the listing of jinshanyun in the United States, it should also be universal. In the global cloud computing track, Amazon's AWS, Microsoft's azure, Oracle, etc. all get high attention in the capital market, and Jinshan cloud, as the first domestic cloud enterprise going to the United States for listing, still has the opportunity to get the preference of capital. Once Jinshan cloud goes public in the United States and performs well, it will actually help market investors have a very rational evaluation of the valuation of Jinshan software.

For Jinshan cloud, after the spin off and listing, reasonable pricing can be obtained to maximize the potential and prospects. On the one hand, under the great aura, as Jinshan office, Jinshan software and Xiaomi, Lei Jun's fourth listed company is the actual controller, and the listing has also attracted great attention. In this respect, it will be beneficial for it to strive for more financing in the secondary market. On the other hand, the fund after financing is also conducive to the future development of Jinshan cloud. Focusing on technology research and development, market development and other aspects is conducive to driving the growth of revenue and expanding the company's valuation in the future.

From the above two perspectives, jinshanyun's listing in the United States is a positive factor for both itself and its parent company, which is why the share price of jinshanyun software rose after the announcement of this news. Just in the optimistic market environment, we still have to go back to jinshanyun. At present, will its development bring a great boost to the listing?

Both before and after, they have to be hit by a group of "cloud" wolves.

Jinshanyun's subsequent growth potential is questioned

Although splitting the listing of Jinshan cloud can help to improve the overall valuation of Jinshan software, the key to how much breakthrough this valuation can achieve depends on the current development of Jinshan cloud. Although the development of global cloud computing industry is very hot, jinshanyun is not the fastest in this track at present, and the resistance in the process of development is likely to affect the judgment of investors on its future development.

1、 The Matthew effect in the public cloud market is intensified, and the growth rate of Jinshan cloud is not as fast as that of Alibaba cloud and Tencent cloud

According to the Research Report of Caixin, the global cloud computing market is expected to reach 390 billion US dollars in 2020, with an average annual growth rate of 17%. Although the growth rate of global cloud computing development industry is good, from the perspective of global market competition pattern, jinshanyun's situation is not very ideal. In terms of global cloud manufacturers ranking, the top ten are AWS, Microsoft azure, Alibaba cloud, Google cloud, IBM cloud, salesforce, Oracle, NTT communication, Tencent cloud and OVH, and Jinshan failed to enter the top ten.

In the Chinese market, although it is not too late for Jinshan cloud to enter cloud computing, its market advantage has been weakened at present. According to the data report of China's cloud server market share released by research agency canaalys in the third quarter: Alibaba cloud's overall growth was 57.9%, accounting for 45%; Tencent cloud's year-on-year growth was 91.6%, accounting for 18.6%; Amazon network services (AWS) ranked third with 8.6% market share; Baidu cloud, the fourth largest growth rate was 70.3%, accounting for 8.2%, exceeding the average. In Q1, Jinshan, Baidu and Huawei are tied for fifth place. From the second quarter, jinshanyun fell out of the top five.

As the market effect of public cloud Matthew becomes more and more obvious, it also means that the market share will be divided by more giants in the head position. For Jinshan cloud, it will be more difficult to seize the market in the future. In terms of competition, there is still insufficient technical strength to compete with Alibaba cloud. In terms of games and videos, although this is the focus of Jinshan cloud's efforts, it still has its own shortcomings compared with Tencent cloud. Compared with Jinshan cloud, Tencent cloud not only has the largest game company Tencent, but also has the largest streaming media platform Tencent video and Tencent music, which has more experience in the field of games and video than Jinshan cloud.

2、 Jinshan cloud's revenue growth slowed down year on year, while the loss situation has not been reversed

Jinshan software revenue mainly comes from online games, cloud services, office software and other three major businesses, and the biggest contributor to the revenue is cloud services. According to Q3 financial report, Jinshan software achieved revenue of 2.003 billion yuan in this period, including cloud service revenue of 976.3 million yuan, a year-on-year increase of 62%, accounting for 48.5% of the total revenue. Although the year-on-year growth rate of Jinshan cloud is still good, compared with the growth rate of the previous quarter, it is still obviously down.

Compared with the financial report of Jinshan cloud, the year-on-year growth rate of Jinshan cloud reached 251.6% in 2015, 130% in 2016, 81% in 2017, and 66% in 2018. In terms of year-on-year growth, the growth rates in the first four quarters of 2018 were 56.3%, 54.2%, 68.4% and 81.0% respectively. With the year-on-year growth rate declining, this also means that the competitiveness of Jinshan cloud in the market is not obvious.

In addition to facing revenue growth year-on-year growth, Jin Shanyun also faces the problem of loss. In order to seize the market, Jinshan cloud relied on "low price loss for scale". With the aggravation of competition, the myth of maintaining the compound annual growth rate of more than 100% for many years did not continue, but also the low price strategy also affected the profit. Previously, some industry insiders said that if Jinshan Cloud does not make strategic adjustments as soon as possible, but will continue to focus on the scale, even the parent company Jinshan Software will be dragged down.

3、 How to reduce the dependence on millet is also a difficulty

Xiaomi and Jinshan software relationship does not need to say, there is Lei Jun in the middle of the relationship, Xiaomi also contributed a lot of revenue to Jinshan software. Under the influence of this relationship, many Xiaomi products and services choose Jinshanyun business. Before Wang Yulin also said that Xiaomi ecology inside the smart home is Jinshanyun special concern direction. In addition to the "1KM edge computing solution", Xiaomi's future car speakers, air purifiers will be the edge of the intelligent IoT, and the return of data, cloud deployment has room to cooperate with Jinshan cloud.

Although there is nothing wrong with binding Xiaomi to Jinshan cloud, its high proportion proves that its ability to participate in market competition independently may not be very strong. At the same time, the capital market will also have some questions and statements about this relationship. For Jinshan cloud, how to win more cooperation from other external enterprises or government agencies in the industry is the key. Expanding more market share can reduce its dependence on Xiaomi.

There is still incremental space in the internal cloud computing market

Is the future valuation space of Jinshan cloud available?

Judging from the signal of Jinshan cloud's listing in the United States released by Jinshan software this time, there are still a lot of optimistic market sentiment, which shows that the capital market is still looking forward to Jinshan cloud's listing, but how much market value return can be brought to investors in the future is the key point. Although jinshanyun has not disclosed data such as issuing price and financing scale at present, it may be able to make a comparison between US Equity Research Institute and the giants of cloud computing industry by comparing them.

Before that, Scott, professor of marketing at New York University's Stern School of Business

At present, the penetration rate of China's cloud computing market is still low, and the major players in the cloud market have considerable market growth space. But what should it do to improve the competitiveness of the industry to improve investors' valuation?

One is to improve the business development capacity of Jinshan cloud in China. On the one hand, to adapt to the development trend of 5g era, Jinshan cloud layout video cloud beach. According to sandvine statistics, in 2019, the global Internet video traffic accounted for 61%; according to statistics, the proportion of Internet video traffic in China is as high as 80%. Thanks to this, the scale of China's video cloud industry is also rising. According to Yiguan ark, the growth rate of China's video cloud scale is increasing year by year. In 2019, the video cloud market scale reached 13.4 billion yuan, an increase of 47% over the previous year.

On the other hand, we have launched a variety of solutions for different enterprises. In the era of enterprise on the cloud, more and more enterprises in the industry are looking for digitalization, which is also an opportunity for Jinshan cloud to develop. At present, Jinshan cloud covers government affairs, finance, medical and other fields. In the future, it will actively expand other new fields and strive to cover more fields to achieve strong growth of Jinshan cloud's performance. Only by achieving a greater breakthrough in market share, can jinshanyun have the potential to grow in revenue and market value.

Second, actively expand overseas business. There is still a lot of space for overseas market to develop cloud business. With the growth of Xiaomi's mobile phone in the overseas market, jinshanyun also keeps up with Xiaomi's overseas development pace. As an important partner of Xiaomi, Jinshan cloud has been following its development steps. In addition to providing IAAs infrastructure services for Xiaomi, it has also actively explored the integration of AI, edge computing and other new technologies, and constantly provided perfect and strong support for Xiaomi's business development and ecological construction.

Although the revenue growth ability of Jinshan cloud business is still good, there is still a big gap between Jinshan cloud and other friends in terms of scale and capital strength from the perspective of the whole industry, which in fact will affect the performance of Jinshan cloud after listing. In the future, whether jinshanyun can have a good performance in the US stock market, the US stock research society will continue to follow up.