Company Profile

Leshi Internet Information & Technology Corporation Beijing researches and develops Internet videoand mobile networking video technology. The Company's service includes network infrastructureservices and the services for video platform. (Source: Bloomberg)

Event

Leshi Internet Information & Technology Corp Beijing recently released its interim financial report of2016.

Comments

The company’s revenue registered rapid growth, nearly half coming from terminal device sales. 1)The company reported 16H1 operating revenue at CNY 10 billion, up 125.59% YoY. The net profitattributable to shareholders stood at CNY 284 million, up 11.64% YoY. 2) Revenues fromadvertisement/terminal device/membership and distribution businesses came in at CNY 1.6 billion,CNY 5.1 billion and CNY 3.1 billion, up 50.84%, 171.13% and 120.94% YoY respectively.

The key operating indicators show favorable results. It has become easier for the company to cashon traffic flows. 1) The company’s website is visited by more than 80 million unique visitors (UV) onaverage per day. The maximum number has hit 230 million. The number of daily visit views (VV)averages 390 million, with the peak volume of 610 million. The cloud video platform has 680 CDNnodes; the 20 Mbps broadband Internet provides services to tens of thousands of corporates clientsand billions of users. 2) The broadcasting of TV series on online platforms helped push up the levelsof daily UV, monthly play volumes and total duration of video play. The rapid growth in traffic flowraised our expectation for its future profitability.

The company’s eco-system is further consolidated, which will further push up its operatingefficiency. 1) More breakthroughs are made in improving the company’s business model of“platform + content + terminal + applications”. 2) The eco-system is highly adaptive and extendable,thus facilitating closer cooperation. We expect that in the future, the company’s operationalefficiency will further improve.

Earnings Forecast and Investment Grading:

We made our EPS forecast for the company at CNY0.46 in 2016, CNY 0.87 in 2017 and CNY1.03 in2018,implying 103x 16E PE, 54x 17E PE and 46x 18E PE. We are optimistic about the development ofthe company’s ‘eco-system’ business model. We expect more synergy to be created to facilitatebusiness cooperation along the industry chain. Reiterate “Buy”.

Potential Risk: Intensifying industry competition