In 2016, gross profit increased significantly, expense rate decreased, and losses were reversed throughout the year.
In the announced annual report, revenue rose 19% to 835.05 million yuan, slightly better than we expected, with a net profit of 21.41 million yuan, exceeding our expectations. To reverse losses for the first time in nearly three years. The company's gross margin rose significantly to 44.9% in 2016. The sales expense rate fell to 12.8% in 2016; this is the result of the company's full return from B2C to B2B, abandoning subsidized marketing and carpet marketing. Although the rate of management expenses has not dropped significantly, it is a relatively excellent performance that the one-time compensation of some B2C employees was eliminated in 2016, which was 1 percentage point lower than that in 2015.
The company has gone out of the negative impact of the transformation of B2C, is returning to the origin, and opened a new page in the field of automotive data electronics.
There are many highlights of new business in 2017, cloud diagnostics and big data platform are beginning to emerge.
In 2017, the company has a large stock of new business, including mini version of X431, truck version of test equipment, pad, environmental protection industry applications.
In addition, the company will continue to optimize cloud diagnostics to create a SAAS service model for remote diagnostics. In addition, the company will appropriately track the latest technologies such as ADAS and V2X Automotive Internet, and appropriately launch its own big data platform.
Investment suggestion
We predict that the company's net profit will reach 84.7 million yuan in 2017 and 170 million yuan in 2018. The amortization of R & D capitalization and the impairment pressure of some bad debts have been fully taken into account here. Corresponding to HK $0.29 and HK $0.59 EPS.
In addition, due to the current new business and big data's income has not yet been able to form a complete reporting period tracking, therefore, need to track 1-2 quarters of new business shipments to revise expectations.
In view of the fact that the company is a data service provider in the automotive field, has a leading position, and the reversal trend has been established, we give a reasonable valuation of 14 yuan in 6 months, corresponding to a price-to-earnings ratio of 24 times earnings and a market-sales ratio of 3.9 times in 2018.
Risk hint
The pressure of pullback that may be caused by the rapid rise of stock prices in the short term.
The sales of the new product fell short of expectations
Some overdue receivables may cause pressure on bad debts.
