21H's education business growth is in line with expectations, and will continue to promote the transformation and upgrading of Ovia in the future, and increase the coordination of education information and vocational education. Taking into account the decline in gross profit margin of the education business, the increase in sales expenses and the increase in R & D investment, the company lowered its EPS forecast for 2021-2023 to 0.48 EPS 0.61 pound 0.68 yuan (the original forecast was 0.52 pound 0.65 pound 0.73 yuan), with reference to the company's historical valuation center and industry comparable company valuation, giving the company 30 times PE in 2022, corresponding to the target price of 18.40 yuan, and maintaining a "buy" rating.
The decline in income is the impact of the divestiture of chemical business, and the increase in the proportion of education drives a significant increase in gross profit margin. 1) income and profit: 1H21 has a revenue of 147 million yuan (- 27.18%), a net profit of 10.36 million yuan (- 67.95%), and a net profit of 9.54 million yuan (+ 286.87%). The decline in revenue is mainly due to the completion of the purchase of chemical assets in 2020, and the current period no longer includes the income of the chemical sector. The decline in homing net profit was mainly due to 25.41 million yuan of chemical disposal income in the same period last year. The increase in net profit deducted from non-return is mainly due to the recognized investment income of 4.86 million yuan in Huasheng Jingshi. 2) costs and expenses: due to the increase in the proportion of education business, the gross profit margin increased to 60.01% (+ 21.67pcts), but it was still lower than that in 2020 (72.29%).
The sales cost increased by 23.51% to 41.247 million yuan, mainly due to the reduction of business activities and lower sales expenses affected by the epidemic in 2020. The company continued to increase R & D investment, increasing R & D expenditure by 41.11% to 37.72 million yuan. 3) Cash: the net cash flow generated by operating activities is-43.63 million yuan, a decrease of 91.01 million yuan compared with the same period last year, which mainly includes the net cash flow generated by business activities in the chemical sector, corporate income tax rebate and asset restructuring in the same period last year. Business growth in the education sector in the current period, affected by the cancellation of social security relief and other factors, operating expenditure has increased compared with the same period last year.
The growth of education business is in line with expectations. Excluding the influence of the chemical sector, the revenue of the 1H21 education sector increased by 61.42 million yuan, or 72%, over the same period last year. Among them, Ovia realized income of 120 million yuan (+ 37.32%), net profit of 23.22 million yuan (- 3.64%), and income of 27.08 million yuan for education business except Ovia. In addition, the company acquired in November 2020, Huasheng Jingshi, which has a 27% stake, achieved an operating income of 135 million yuan (+ 1.70%) and a net profit of 18.7473 million yuan (- 29.93%), mainly due to changes in income composition and increased investment in research and development. Huasheng's net profit after tax in 2021 and 2022 is promised to be no less than 160 million yuan and 270 million yuan.
Promote transformation and upgrading and accelerate business collaboration. In the future, the company will continue to promote the transformation and upgrading of Ovia, focusing on the research and development of a new platform based on alternative chip development. This year, we plan to develop all the original products on the new platform. At present, we have completed the development of MCU, platform host, interactive terminal, head camera and cloud mirror camera products. We have continued to deepen the development of educational applications. In the first half of the year, we have completed the release of 13 application platforms, including fully connected platforms, cloud live streaming and other application platforms. Complete the restructuring of the business departments of the three major business departments of education, military and government, government and enterprises, and solve the boundary problem between education business and cross-industry business. In addition, the company assists Huasheng Jingshi in carrying out share reform and other important matters in accordance with the law, nominates directors, independent directors and supervisors to enter Huasheng Jingshi, and cooperates with Huasheng to build the digital education network platform of the Central Party School. In areas authorized by partners in the company's vocational education industry, Huasheng Jingshi, as a national new culture investment enterprise, can participate in all the business in the above regions and vigorously promote business synergy.
Risk factors: the rise of raw materials, the recovery of terminal demand is not as expected, business coordination is not as expected and so on.
Investment suggestion: 1H21's education business growth is in line with expectations, and will continue to promote the transformation and upgrading of Ovia in the future, and increase the coordination of education information and vocational education. Taking into account the decline in gross profit margin of the education business, the increase in sales expenses and the increase in R & D investment, the company lowered its EPS forecast for 2021-2023 to 0.48 EPS 0.61 pound 0.68 yuan (the original forecast was 0.52 pound 0.65 pound 0.73 yuan), with reference to the company's historical valuation center and industry comparable company valuation, giving the company 30 times PE in 2022, corresponding to the target price of 18.40 yuan, and maintaining a "buy" rating.