1H21 performance is lower than we expected.
The company announced 1H21 results: revenue was 4.511 billion yuan, down 13.2% from the same period last year; net profit from home was 837 million yuan, down 16.5% from the same period last year; net profit from non-return was 584 million yuan, down 22.1% from the same period last year, of which 2021 income was 2.489 billion yuan, down 10.4% from the same period last year; net profit from home was 555 million yuan, down 22.696 from the same period last year The non-return net profit was 401 million yuan, down 24.7% from the same period last year. The company's performance was lower than we expected, mainly due to the lower-than-expected recovery of offline travel business.
Development trend
The streaming media strategy has been effectively promoted, and the radio and television business has been under constant pressure. 1) streaming business: as of 1H21, there are 60.1 million IPTV users, a net increase of 1.45 million over 2020, and 74.09 million OTT users, a net increase of 13.38 million over the end of 2020. The company's BesTV+ streaming strategy continues to advance, creating programs such as "perfect Summer" with Oriental Satellite TV on the content side, and launching "B+ Honeycomb Project" for internal creative solicitation and incubation; realizing a cross-screen connection between a lifelong education platform and multiple fusing screen variety shows on the channel side; and setting up Oriental broadcast wheat on the business model to speed up the transformation to content e-commerce. 2) Radio and television network: as of 1H21, there are 56 million effective users of pay TV, 1 million fewer than at the end of 2020, and 18.5 million interactive VOD users, 2.5 million fewer than at the end of 2020. We believe that the company's cable business still faces relatively fierce competition in the industry, and the size of users may continue to be under pressure. The 1H21 revenue of the company's online business decreased by 1.64% to 3.04 billion yuan compared with the same period last year, and the gross profit margin increased by 13.5ppt to 39.8% compared with the same period last year.
The speed of offline business recovery is lower than expected, pay attention to the impact of the epidemic. The company said that sightseeing, tourism, hotel management and other businesses were greatly affected by the epidemic, with 1H21 offline business revenue falling by 30.8% to 1.44 billion yuan compared with the same period last year. However, since the market gradually recovered in April, the conference revenue of 1H21 Shanghai International Conference Center increased by 73% compared with the same period last year, and the Oriental Pearl Radio and Television Tower achieved revenue of 210 million yuan. We believe that there is still a local recurrent risk of the domestic epidemic, and we suggest that we should pay attention to the impact on the company's offline business. Follow the business progress of 5G and Smart City. In terms of emerging business, the company said that it actively promotes frequency clearing in the 700m band on the technical side, provides technical support for intelligent radio and television network security, improves the application plan of the 5G industry on the application side, promotes the integration of radio and television 5G industry chain modules and application equipment, and cooperates with Huawei to complete the testing and verification of the world's first 5G 700m law enforcement instrument. At the same time, the company is participating in the construction and operation of the Internet of things operation center and smart city construction business in Shanghai. We believe that the integration of the national network and the development of Radio and Television 5G may bring new opportunities for the company, and we suggest that we pay attention to the follow-up progress.
Profit forecast and valuation
Considering that the offline business of the epidemic may still be uncertain, the net profit of 2.7% in 2021 / 2022 will be reduced by 7.396 to 18.07 / 1.863 billion yuan. The current stock price maintains a neutral rating corresponding to 14.8% of Ppace E in 2021 / 2022. Due to the downgrade of profit forecast and the intensification of industry competition, the target price is lowered by 19.8% to 8.73 yuan, corresponding to 16 times the upside space of Pmax E and 11.4% in 2022.
Risk
The impact of the epidemic exceeded expectations; competition intensified; and new business did not advance as expected.
