Recently, the company released its results report for the first half of 2017. During the reporting period, the company achieved operating income of 678 million yuan, an increase of 8.17% over the same period last year, and a net profit of 25.3319 million yuan, an increase of 39.09% over the same period last year. In the context of a marked slowdown in the growth trend of the industry, it is not easy to achieve such revenue and net profit growth.
Affected by the industry trend, the growth rate of traditional business income has entered a slow zone: the company's traditional main business is to provide information support system construction and services for telecom operators and customers in radio and television, energy, government, finance, railway and other industries. From the past capital implementation of operators and the development cycle of network technology, in the next two years, as operators'4G network is still in the investment recovery stage, operators are unlikely to make large-scale network investment.
Therefore, the capital expenditure of operators is unlikely to rise significantly when the 5G mobile communication network has not entered the stage of large-scale construction. The company's traditional main business will still be in a slow growth range, there will not be much fluctuation.
Operating costs and management expenses were properly controlled, and the return net profit grew by 39%: H1 in 2017, while revenue growth slowed down, the company effectively controlled operating costs and management expenses. Operating costs increased by about 4.7% compared with 2016 H1; administrative expenses increased by about 5.5% compared with 2016 H1. The growth rate of operating costs and management expenses is about 3.5 and 2.7 percentage points lower than that of revenue, respectively. Due to the proper control of formal operating costs and management expenses, the company's net profit of H1 in 2017 reversed the trend, increasing by about 39% year-on-year to about 25.33 million yuan.
As the company moves forward, the company's new business layout is expected to bring new growth: after the traditional main business enters the range of slow growth, the company has stepped up its market expansion in the areas of smart city, big data, information security, network optimization services, and so on. continue to explore new business areas and profitability for sustainable growth.
Investment suggestion: we predict that the company's EPS from 2017 to 2019 will be 0.27,0.33 and 0.39 yuan respectively. The 6-month target price is 11.88 yuan, with a rating of-A for increasing holdings.
Risk tips: 1, the company's traditional main business has declined significantly; 2, the company's operating costs and management expenses control is not as expected; 3, the company's new business promotion is not as expected; 4, the systemic risk of the securities market.
