Main points of investment
Event: the company issued an announcement to provide the company's annual performance forecast in 2015. the net profit of shareholders belonging to listed companies reached 167.2 million yuan to 183 million yuan, an increase of more than 200% over the same period last year. The increased profits include non-recurring gains and losses of about 13 million yuan, as well as consolidated results for the acquisition of mutual advertising in the second half of the year.
Event comments: the company's original main business is radio frequency connection systems and optical fiber connectors, due to the sharp decline in shipping prices, so operating income can not be significantly increased with the increase of 4G large-scale construction procurement. Since 2013, the company has carried out three major mergers and acquisitions and gradually expanded its business to mobile communication terminals, telecommunications information services and Internet advertising business. It is estimated that the original main business revenue accounted for less than 20% in 2015, and the company has successfully completed the transformation through acquisition activities, and brought a great improvement in performance.
Communication accessories and communication terminal technology reserve, prepare for the future 5G: the company has accumulated technology in RF connection system for many years, but due to the peak of domestic 4G mobile network construction, it is difficult to maintain significant growth. In the 5G era, the demand for new frequency and new technology will lead to a rapid growth in the procurement of RF connectors, so the company takes to maintain the original business technology reserve, waiting for the 5G opportunity. On the other hand, with the rapid development of IDC and broadband access network, optical fiber connectors can still grow to a certain extent.
The telecom information service business has an eye-catching performance and has become the backbone of the company's revenue: the domestic short message business has shrunk obviously due to the impact of OTT business, especially the rapid decline in the number of personal peer-to-peer SMS, but on the other hand, with the rise of a large number of Internet companies, enterprise SMS business has maintained rapid growth. Interconnection, the capital of the company's mergers and acquisitions, is developing well in SMS services, with an expected growth of more than 80% in 2015 and maintaining a gross profit margin of about 25%, which has had an extremely positive impact on the company's profitability. In addition, through the information cooperation with various enterprises, the company has obtained a large number of industry and customer data, which is of high utilization value.
Huge investment in Internet advertising to accelerate the transformation of information services: the company completed the acquisition of Internet advertising SSP provider Mutual Advertising in June 2015, and the company is expected to provide a net profit of more than 50 million yuan in the second half of 2015. China's Internet advertising is a huge and rapidly growing market, which is expected to be close to 400 billion in 2018. The company has the following advantages: 1. Mutual advertising itself has a strong technical strength and resources, has won the iron general 12306 website advertising order; 2. The National Capital Interconnection has accumulated more industry and customer data in the information service business, and the effective integration into the advertising business will enhance the overall competitiveness of the company's information service and increase the gross profit margin.
Profit forecast and investment advice: in the next two years, the communication accessories business will benefit from the accelerated deployment of 4G network by China Unicom, the communication terminal business will shrink slightly, and the information service business and Internet advertising business will be initially integrated to achieve good growth. It is estimated that the company's EPS in 2016-2017 will be 0.57 yuan and 0.72 yuan, corresponding to PE 75 / 59 X. We will not give a rating for the time being.
Risk hint: major shareholders due to reduce the risk, the original mutual advertising founder holds about 20% of the shares in the company, will be lifted in the middle of this year; the transformation of business competition led to less than expected risk, because there are many strong competitors in the Internet advertising field, and the industry development is too rapid, the former management of Wutong Holdings lacks experience in Internet business management, which may lead to business failure.