Main points of investment:
The company's performance is growing steadily, and the data business is developing rapidly. In the first half of 2016, the company achieved operating income of 1.287 billion yuan, an increase of 4.47 percent over the same period last year, and a net profit of 112 million yuan belonging to shareholders of listed companies, an increase of 24.13 percent over the same period last year. The growth of the company's operating income and net profit is mainly due to the rapid development of personal broadband, group dedicated line and other data services on the basis of the steady growth of the main video industry; the large year-on-year increase in net profit is mainly due to the fact that the growth rate of income in the reporting period is higher than that of costs and expenses, as well as the slowing growth of depreciation of fixed assets, reducing costs and efficiency, reducing management costs, issuing medium-term notes to save financial expenses and other reasons.
The company's strategic pattern has changed significantly, focusing on building a radio and television network group with western characteristics. The company accelerated the evolution from "unified television" to "regionalized community television", accelerated the transformation from "traditional cable TV operator" to "converged media operator", the new system and mechanism began to operate in the first half of the year, and the new strategic layout was initially formed. By the end of June, the company had 5.597 million main digital TV terminals, 909000 secondary terminals and 1.85 million HD terminals, including 1.459 million HD interactive terminals and 391000 HD live broadcast terminals. The construction of cable TV channels has fully covered Shaanxi Province. In the future, it will focus on developing high-definition interactive services and raising the ARPU value paid by users. At the same time, it has formed a good strategic cooperative relationship with Shanghai Wenguang and Jiecheng shares.
In the direction of "Internet +" and "TV +", we will speed up the upgrading from traditional business to intelligent business. The company has actively laid out smart cities, smart communities, smart hotels, smart beautiful villages and other businesses, and successfully signed smart city projects such as Wisdom Hanzhong, Wisdom Hancheng, Wisdom Langao, etc.; build 17 intelligent communities, including the Southern Hospital of the Provincial CPC Committee, and the Wisdom Yellow River Community, to greatly increase the scale of digital TV users, personal broadband users and HD interactive users in the community. Focusing on the government information market, we have won provincial information projects such as the Provincial Health Planning Commission's "people's Health", the province's "Comprehensive Management Network", the province's prison system video conference, and the provincial community big data service platform, which is conducive to quickly transforming network advantages into industrial advantages and providing important support for speeding up the transformation.
Localize characteristic content to accelerate layout. In terms of localized characteristic content, the company creates an intelligent portal and enriches localized application content according to the personalized and customized needs of users. The investment works cover traditional films and TV dramas, documentaries and online dramas, including "the starting Point of the Silk Road-documentary on Shaanxi Cultural Promotion", the film "ordinary Football", "Goodman" and "Xia you Arbor Paradise", TV series "behind the Mask" and other works. Based on the two-way network, it provides users with rich live channels, pay channels and interactive on-demand, and introduces third-party content providers through the open platform to provide users with a variety of content. Shaanxi Radio and Television Silk Road Film and Television Culture Communication Co., Ltd., a wholly owned subsidiary of the company, will become an important platform for the company's content plate, nurturing the content industry into an important growth pole in the future, combined with the construction of cable and wireless converged network. To provide strong support for the successful transformation of the company into a financial media operator.
Profit forecast: we expect the EPS of the company from 2016 to 2018 to be 0.38,0.49 and 0.59 yuan respectively. With reference to the 43 times valuation of Wasu Media in the same industry, and considering the positive impact of the company's fixed growth projects on the company's performance, we give the company a valuation of 53 times in 2016, corresponding to the target price of 20.14 yuan. Maintain the buy rating.
Risk hint: market competition intensifies, business transformation is less than expected, and systemic risk.
