Introduction to this report:
In 2013, Aowei's performance was affected by a decline in demand for premium networks, but the company actively promoted transformation and development, and the national layout of the virtual pension business began to take shape. At the same time, progress was also made in the industrial Internet of Things and weapons and equipment qualifications.
Key points of investment:
Maintain the “increase in holdings” rating, with a target price of 11.2 yuan. The forecast for Ovie's annual report and quarterly report is in line with expectations. Based on the judgment of the current market environment, the company has begun to control expenses and try to transform and develop, and the virtual pension business layout is becoming more and more extensive. We maintain our 2014-2015 EPS forecast of 0.15/0.22 yuan respectively, with a target price of 11.2 yuan, and a target market value of 4 billion yuan to increase holdings.
Affected by the decline in demand for Internet Premium, the company lost money in 2013. The company achieved revenue of 340 million yuan in 2013, a year-on-year decrease of 14.3%, and a net profit loss of 48.09 million yuan. On the one hand, the demand for network advantages of operators transitioned from 3G to 4G in 2013, causing demand to be “unanswered”; on the other hand, the State Administration of Radio, Film, and Television integrated most ministries and departments, causing CMMB investment to plummet. Affected by this, the company's net premium coverage equipment and technical service revenue fell 25% and 4% respectively, which dragged down the growth in revenue scale. At the same time, the company calculated asset impairment losses totaling 27.79 million yuan, further reducing profit performance.
It is predicted that losses will narrow in Q1, and the virtual pension business layout will become a bright spot. At the same time, the company predicted a loss of 4 to 8 million yuan in the first quarter, which was significantly narrower than the same period in 2013. We expect that with the development of 4G, it is a probable event that the company's main business will improve quarter by quarter. In its annual report, the company emphasized the layout of the pension business, established two new private non-subsidiary companies in Lijiang and Gansu, and plans to actively deploy in Chongqing, Fujian, Hainan, Liaoning, Sichuan, Shaanxi, Hubei and other places. We believe that after more than two years of development, the national layout of virtual old-age care has begun to take shape, and the number of users is growing imminent.
Obtained equipment contract qualifications and weapons equipment research and production permits, and entered the field of national defense. The company is also actively expanding customers in the field of traditional communications. Since December 2013, it has obtained licenses related to defense equipment one after another, and already has a foundation for supplying defense customers. We believe that the company has rich technical experience in the field of wireless communication, and developing high-margin customers will help transform traditional businesses.
Risk warning: Competition in pension services is intensifying; operators' network optimization promotion process falls short of market expectations.