Main points of investment
The performance growth mainly comes from the consolidated contribution. The company was founded in December 2002, until 2015 has been focused on the LED industry, mainly supplying high-end LED light source devices and LED lighting products. Since 2012, as the LED industry from the growth stage to the mature stage, the company's revenue and profit growth began to slow, the company decided to transform at the end of 2014, and finally decided to enter the Internet advertising industry. In 2015, the company successfully acquired a 100% stake in Rishang Optoelectronics, and incorporated Rishang Optoelectronics into the merger from June 1, 2015. In 2016, the company successfully completed the acquisition of 100% stake in Dingsheng Yixuan and Yiwan Wireless, and included two Internet advertising companies in the consolidated statement from March 31, 2016.
In the first three quarters of 2016, the company achieved an operating income of 1.025 billion yuan, an increase of 84.78% over the same period last year, and a net profit of 117 million yuan, an increase of 254.08% over the same period last year. The performance growth is mainly due to the inclusion of Sun Optoelectronics, hundreds of millions of Wireless and Dingsheng Yixuan in the scope of the consolidated statements. The company expects its net profit for 2016 to be between 1.36 yuan and 164 million yuan, an increase of 140-190%.
Firmly transform the Internet advertising industry, and plan to build the whole industry chain operation system of Internet advertising media. Dingsheng Yixuan, which the company acquired in the early stage, is a well-known Internet advertising company in the home decoration industry in China, focusing on providing Internet search engine advertising services for Chinese home decoration enterprises. It is the exclusive agent of Baidu, Inc. 's KA department in the home decoration industry, and has established cooperative relations with many well-known household brands such as Oupai, Jiumu, Dongyi Risheng and so on. Hundreds of millions of Wireless focuses on mobile Internet advertising business, and relies on various media channels and resources to launch and promote all kinds of hot and well-known APP applications, and has established cooperative relations with well-known Internet companies such as Tencent, Baidu, Inc., BABA, etc., to promote a number of popular APP, such as QQ Music, Mango TV, Baidu, Inc. Map, iQIYI, Inc. and so on. In September 2016, the company announced again that it intends to acquire 100% stake in Vientiane New Motion, which is currently under review by the Securities Regulatory Commission. Vientiane New Motion, which mainly focuses on precision marketing, began operation in April 2015. from January to June 2016, it has achieved sales income of 121.0438 million yuan and net profit of 16.9079 million yuan, an annualized increase of 497.27% and 660.66% respectively over 2015, showing explosive growth.
The other side of the transaction promised that the net profit after deduction in 20172018 was not less than 3000,3900, 5070 / 58.305 million, not less than 2500, 3250 / 42.25 million, and not less than 4000,5200,760 / 77.74 million, respectively. All three companies are in the stage of rapid growth. According to iResearch, from 2012 to 2015, the size of China's Internet advertising market increased from 77.31 billion yuan to 209.37 billion yuan, with a compound growth rate of 39.39%. In 2015, China's Internet advertising revenue is nearly twice that of radio and television advertising, and will reach 418.67 billion yuan in 2018. The mobile Internet advertising market reached 90.13 billion in 2015 and is expected to reach 326.73 billion yuan in 2018, accounting for 80 percent of the overall Internet advertising. The company established the "one vertical and one horizontal" Internet advertising development strategy in early 2015: horizontally, it will focus on the five core links of the industrial chain: creative planning, channel delivery, data mining, media resources and procedural purchase; vertically, it will continue to dig deep into high-quality targets that focus on different vertical segments of industries and expand business coverage. It is expected that the company will further acquire high-quality companies in the industry and build a real Internet advertising media industry-wide chain operation system.
There is a high probability that the LED business will continue to develop steadily. The company has focused on the LED industry for more than ten years and has enjoyed a certain reputation and market share in the field of LED packaging and lighting. With the continuous improvement of LED backlight and lighting permeability, the LED industry has entered a mature stage. On the one hand, the company continues to cultivate traditional stock applications such as TV backlight, lighting sources and display instructions; on the other hand, it actively lays out and develops subdivided incremental markets such as plant lighting, automobile lighting and infrared LED. With the release of the scale of demand, the relationship between supply and demand in the industry is expected to be improved. We expect the probability of the company's LED business to maintain steady development in the future is high.
In 2015, the company quickly entered the middle and high-end LED advertising logo lighting market segment through the acquisition of 100% stake in Rishang Optoelectronics, and successfully acquired 22% stake in Zhongshan Ouman. Nishang Optoelectronics undertakes that the non-net profit of 2014, 2014, 2016, 2016, and 2017 will not be less than 3000, 000,4050, and 5265 / 65.81 million yuan, respectively, and Zhongshan Auman promises that the non-net profit of 2015, 2016, 2016 and 2017 will not be less than 1500, 195 / 25.35 million yuan, respectively. In the field of LED, the company's profitability and comprehensive competitiveness have been further enhanced. Although the company has clearly transformed the Internet advertising industry, LED, as a profitable business area, is not expected to give up in the short term.
Profit forecast and investment rating. We recognize the company's sound business style and are optimistic about the development potential of the company in the field of Internet advertising. It is estimated that the company's operating income in 2016 / 2017 will be 14.23 / 2.234 billion yuan, and its net profit will be 1.63 / 277 million yuan, corresponding to 0.20 EPS 0.33 yuan. If we give the company LED business 25-30 times PE in 2017 and give Internet advertising business 50-55 times PE considering the rapid growth potential of the Internet advertising industry, the reasonable valuation range of the company is 13.00-14.63 yuan. At present, the company's share price is 14.08 yuan, which is in a reasonable valuation range and is rated as a "cautious recommendation".
Risk hint. The performance of the acquisition target is lower than expected; the LED industry is becoming more competitive and profitability is declining.
