Performance in the first half of 2016 was slightly higher than expected

Gao Hong Co., Ltd. announced its results for the first half of 2016: operating income was 3.465 billion yuan, up 16.33% over the same period last year; net profit attributed to the parent company was 27.036 million yuan, up 5.76% from the same period last year, corresponding to 0.0457 yuan per share. Operating income is 0.5% lower than CICC's forecast, and pre-tax income is 3.3% lower than CICC's forecast. The net profit of returning home is 4.0% higher than CICC expected.

Trend of development

Enterprise information business qualification is complete, stable development. The company has successfully passed the review and certification of secret-related information system integration Class An and information system integration and service-level qualification. Call center business has the first market share in Guangdong industry. Although the enterprise information business is growing rapidly, the gross profit margin has dropped significantly (the communications equipment business increased by 87.21% compared with the same period last year, but the gross profit margin fell 16.3 percentage points to 17.03%).

The gross profit margin of IT sales is stable and the growth is steady. The company's IT sales business has a core sales channel and has a stable cooperative relationship with upstream manufacturers. In the first half of the year, revenue increased by 20.22%, and gross profit margin was stable, falling only slightly by 0.38%. It is expected to maintain steady growth in the future.

Trusted computing and vehicle networking are still in layout and can be expected in the future. In the first half of the year, the company released a reliable series of products and management platform that can be controlled independently. At present, the maturity and integrity of the products are in the lead in China. At the same time, the company has also carried out more in-depth research and development in the fields of vehicle networking and information security. Revenue is expected to contribute in the future.

Profit forecast

Although the first half of the year is higher than expected, considering that the company's profits are mainly concentrated in the second half of the year, in accordance with the company's equity incentive performance guidelines, we maintain the full-year profit forecast for 2016 and 2017 unchanged. It is estimated that the net profit of return to home from 2016 to 2018 will be 142 million yuan (+ 23.1 pound) (10.6%) respectively.

Valuation and suggestion

At present, the company's share price is equivalent to 65 times the price of Pram E in 2017. We maintain a neutral rating, but raise our target price by 17.85% to 13.14 yuan, which is 8.07% lower than the current share price. The early rise in the company's share price is mainly due to the market's enthusiasm for car networking, but the car networking business can not contribute revenue in the short term.

Risk.

Fierce competition in the enterprise information market has led to a decline in profit margins; IT sales business is not up to expectations; Internet lottery policy is not clear; car networking and trusted computing have been unable to contribute revenue.