【行业研究报告】中国软件国际-US is reviewing Huawei export license policy

2Mar2023
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
Chinasoft(354HK)
USisreviewingHuaweiexportlicensepolicy
AccordingtoWSJ,theBiden’sadministrationisreviewingHuaweiexportlicense
policy.TheUSmaynotgrantnewlicensestoUScompanies(e.g.Qualcomm,
Intel)forsalestoHuaweiovernationalsecurityconcerns.Thenewactionwould
extendthecoveredproductsfrom5Gtechnologytoevenolder4Gproducts.We
thinkthiscouldaffectHuawei’sproductdevelopmentroadmapandthus
Chinasoft’srevenueandmarginoutlook.Suggestinvestorstofocusonmargin
trendinMarresultsannouncement.
USmayfurtherrestrictexportstoHuawei,includingolder4Gproducts.
WSJreportedthattheBiden’sadministrationisconsideringrevokingexport
WSJreportedthattheBiden’sadministrationisconsideringrevokingexport
licenseissuedtoUSsuppliers(e.g.Qualcomm,Intel)forsalestoHuawei
overnationalsecurityconcerns.HuaweiwasplacedontheEntityListsince
2019butthattechnologybelow5GcouldbesoldtoHuaweibyUSsuppliers
underexistingrules.Thenewactionwouldextendthecoveredproductsfrom
5Gtechnologytoevenolder4Gproducts.Accordingtothenews,theWhite
HouseistellingCommercetocutoffthe4GsalesofHuawei.Accordingto
CommerceDepartment’sspokesman,theCommerceapprovedroughly
70%oftheexportcontrollicenseapplicationslastyearinvolvingChina.On
theotherhand,BIShasapprovedHuaweilicensesvaluedatUS$61.4bn
betweenNov2020andApr2021afterHuaweibeingputintotheEntityList.
Huaweiproductdevelopmentplancouldbeaffected,negativeto
Chinasoftrevenueandmargin.Wethinkthemoveimpliesaheightened
US-Chinatension.AlthoughHuaweishouldhavepiledupinventoryforthe
short-termusebutitmayhurtHuawei’sproductdevelopmentplan.Chinasoft
providesITservicessuchassoftwareandhardwareproductdevelopment,
testing,lifecyclemanagementetc.toHuawei.TheCompanyderived54%
ofrevenuefromHuaweiinFY21,basedonourestimate.Thepotentialnew
restrictionsmayaffectHuawei’sproductdevelopmentroadmapandhence
revenueandmargintoChinasoft.
Sharepricecouldbeunderpressureinthenearterm,waituntilmore
colorsonmargin.Whilewearepositiveonthelong-termsoftware
localizationtrendandenterprises’ITspendingrecoverypostCOVID,weare
concernedtheearningsdownsideriskthatHuaweimaysqueezesuppliers’
marginfurtheramidtougherbusinessenvironment.Wehavenotadjusted
ourearningsforecast.MaintainBUYwithunchangedtargetpriceof
HK$9.14.