In the first half of 2017, revenue increased 23% and profit increased 323%. The company announced a dividend of 0.2 yuan. The company's revenue growth exceeded our expectations by about 10%, profit growth all exceeded our expectations by about 13%, and announced an interim dividend of 0.2 yuan (dividend rate of about 1.9%).
In the first half of the year, the company drastically reduced expenses by optimizing personnel expenses. The sales expenses ratio and management expenses ratio declined by a large percentage compared to the same period last year, and we expect this downward trend to continue as revenue increases;
At the same time, the company reduced its interest-bearing debt ratio to 19% (29% in the same period last year), and the 31% increase in prepaid accounts also reflected the potential impetus for subsequent orders and revenue growth;
Judging from the annual report for the past six months, the company has definitely been on the path of recovery and has once again given market confidence.
The main product in the second half of the year was AIT. The main market was overseas. The main accumulation was that the data company released epoch-making AIT automatic inspection equipment in the first half of the year, which is equivalent to “driverless driving” in the automotive inspection market. The experience was good, and the user threshold was greatly lowered. Since the company adopted a prudent attitude and continued to optimize the equipment, it was not vigorously introduced to the market in the first half of the year, but according to our research and experience, this is a killer product that can convert TOB products that are originally specialized in automotive inspection into TOC. We are very optimistic about TOC sales in China and around the world based on this concept, and expect the product to create a steady stream of surprises for the company in the second half of the year and next year; this year, the company accelerated the expansion of overseas business. The overseas ordering event was held in June. It is expected that as AIT products enter the market, there will be a large number of orders from overseas markets in the 3rd quarter; this year, the company accelerated the migration of users to the cloud. As a result, cloud data volume increased 192% year on year, maintenance reports increased 489% year on year, covering 7.8 million vehicles, with a cumulative report of 80 million reports Ten thousand servings. Although these businesses have not brought revenue to the company in the short term, with the advent of automotive electronics and cloud computing, we think the cloud business model will begin to take shape next year.
Investment advice
In view of the company's steady performance in the first half of the year, as well as expectations for accelerated growth in overseas markets and the launch of new products in the second half of the year, we raised the company's net profit forecast for 2017 to RMB 103.26 million (previously forecast of RMB 84 million), and net profit for 2018 was RMB 180 million (previous forecast of RMB 170 million). Corresponds to $0.35 and HK$0.63 EPS.
Meanwhile, the controlling shareholder is optimistic about the company's growth, increasing its holdings by 400 million yuan (price 9.18 yuan). We maintained a reasonable valuation of 14 yuan for 6 months, corresponding to a price-earnings ratio of 22 times in 2018.
Risk warning
Pullback pressure may be brought about by a rapid rise in short-term stock prices; sales of new products fall short of expectations; some overdue accounts receivables may cause pressure for bad debts.
