Events:
The company released its quarterly report on April 29, with operating income of 359 million yuan in the first quarter of 2017, an increase of 112.51% over the same period last year. The net profit attributed to the owner of the parent company was 743100 yuan, down 65.96% from the same period last year. The comprehensive gross profit margin was 11.32%, down 3.90% from the same period last year.
Comments:
Research and development investment led to a decline in performance, waiting for the smart terminal business to start. There are two main reasons for the decline in 2017Q1's performance, one is the research and development expenses of own-brand mobile phones but the actual sales during the reporting period, and the other is the financial expenses incurred by the company's previous loans to shareholders. We believe that with the release of independent brands and secure mobile phones, the company's performance will gradually improve, and the future is worth looking forward to.
The security mobile phone industry will accelerate its volume. We judge that the market space for secure encrypted mobile phones in the special industry alone is more than 30 billion, and the market space is likely to double if the commercial market is taken into account. There are three reasons why the relevant companies and products in the industry failed to expand the market rapidly: national demand did not hit the ground, there are no nationally produced security encryption products, and failed to find effective industrial alliances to promote. However, we judge that these three factors are now mature, and the secure encryption mobile phone industry will accelerate the volume.
With the two wings flying together, the company's independence and industry mobile phones will have a bright future. The company will release two GOME phones in late March, of which the high-end K1 has won two awards for IF products and packaging. We judge that GOME phones are expected to increase rapidly with the support of Gome channels. In terms of secure mobile phones, Dejing and Spreadtrum, Zhongke Hongba and Yuanxin Technology have formed a strategic alliance and become the only partner in the field of secure mobile phones. It is expected that the number of business lines laid out by the company will be expanded rapidly in the next two years. We believe that all the businesses of the company are in a state of readiness and have unlimited prospects in the future.
The embryonic form of safe and intelligent ecological layout has emerged, and the strategic chess game is worth looking forward to. First of all, the company takes the security smartphone as the starting point to vigorously develop its own-brand communication products. The follow-up company takes information security as the starting point to provide secure communication solutions for various industries. Finally, the company will take "security intelligence" as the core, promote the development of own-brand mobile security intelligent terminals, and focus on providing secure and intelligent services for individuals, families and industries. Gradually form the development layout of "secure mobile phone-smart hardware-smart life-intelligent ecology", and become a leading professional intelligent terminal manufacturer and service provider in the industry.
We are optimistic about the company's long-term planning and layout and maintain the "highly recommended-A" rating. We expect the net profit of Sanlian Trading Company for 17-19 years to be 124 million, 205 million and 267 million yuan, corresponding to EPS 0.49 yuan, 0.81 yuan and 1.06 yuan. The current share price of 14.61 yuan corresponds to 30 times, 18 times and 14 times PE, maintaining the "highly recommended-A" rating.
Risk hint: secure encrypted mobile phones do not meet expectations; self-branded mobile phones suffer serious losses.