Main points of investment

Items:

The company announced its semi-annual report for 2017, with operating income of 548 million yuan in the first half of 2017, down 14.45% from the same period last year, and net profit of-22.0189 million yuan, down 181.85% from the same period last year. The net profit from January to September is expected to be 3969-68.04 million yuan, a year-on-year change of-30% and 20%.

Peace viewpoint:

The company's revenue declined in the first half of the year, and the follow-up performance is expected to be good: according to the company's semi-annual report for 2017, the company achieved operating income of 548 million yuan in the first half of 2017, down 14.45% from the same period last year, and the net profit of returning home was-22.0189 million yuan, down 181.85% from the same period last year. The company's revenue and homing net profit decreased sharply in the first half of 2017 compared with the same period last year, mainly due to the extension of project delivery cycle due to the large volume and complexity of some projects. During the reporting period, the subsidiary car Network Yunlian focused on developing business in the areas of the Internet of things, such as new energy, smart sanitation and smart city, while most of this part of the business were overseas and government projects, and the landing cycle of the project was longer than that of the same period last year, resulting in a significant decrease in the actual recognized revenue in the first half of the year compared with the same period last year. Specifically, in terms of period expenses, the company's sales expenses and management expenses increased by 24 million yuan over the same period last year, an increase of 13.71%. This is mainly due to an increase of 9 million yuan in labor costs due to the introduction of the company's new business development team and annual salary adjustment. the opening of new office buildings and new intangible assets increased depreciation and amortization expenses by about 10 million yuan, and financial expenses increased by nearly 6 million yuan, an increase of 195% over the same period last year. In terms of gross profit margin, the company's gross margin in the first half of the year was 33.01%, a decrease of 1.57 percentage points over the same period last year, with no substantial change.

The vehicle network is actively expanding, and the core competitiveness of the technology is obvious: the vehicle network business is actively expanded to Southeast Asia, and shares in the British car network data analysis company THE FLOOW LIMITED. During the reporting period, the subsidiary car Network Yunlian introduced a new business development team to focus on the development of new energy, smart sanitation and smart city on the basis of expanding the application development of the industry platform. In terms of technology, Yunlian won the Best Enterprise Award of the year in the 7th China International New Energy vehicle Forum and the Best solution provider in the 4th China (Guangzhou) International vehicle networking Conference. In the environment where the technology is mature and the policy is fully promoted, the number of Internet users is growing rapidly. According to the data of the forward-looking Industrial Research Institute, the number of vehicle Internet users in China has exceeded 10 million in 2015. It is estimated that by 2020, the penetration rate of vehicle Internet users in China will be close to 25%, and the corresponding market size will exceed 500 billion.

Focus on FinTech and biomedical health industry to promote the overseas layout of Biology five: during the reporting period, the company launched the acquisition of Shenzhen Zanrong Electronic Technology Co., Ltd., a financial industry data storage solution, and established a joint venture with Zhongrong Dingxin Investment Management Co., Ltd., a wholly-owned subsidiary of Zhongrong International Trust Co., Ltd., to develop and build the core business system of asset management and wealth management industry. Financial industry revenue accounted for 11.63% of total revenue, up 1.72% over the same period last year. Revenue from the biological industry accounted for 9.32% of total revenue, up 1.37% from the same period last year. During the reporting period, the company plans to use the funds raised to invest 514 million yuan in the "Biological five Computing Project to support Molecular Medicine". At the same time, Bio five business will strengthen the development of overseas markets and start the layout of the US market.

The company makes a more in-depth layout of Bio Wuhe vehicle networking business plate, invests R & D team and funds, and is building "Bio five Computing Project to support Molecular Medicine" and "Multi-dimensional big data Integrated Operation Service system Project based on vehicle networking". In the field of Biology Wuhe vehicle networking, expand the model of "platform + operation services" and increase data service revenue.

Profit forecast and investment advice: we keep the profit forecast unchanged. From 2017 to 2019, the company's net profit is expected to be 282 million, 334 million and 401 million respectively, and the corresponding EPS is 0.44,0.53 and 0.63 yuan respectively. The PE corresponding to the company's closing price on August 18 is about 40.7,34.4,28.7 times, respectively. We continue to be optimistic about the unique competitiveness of the company's business model and the development prospects of various businesses, and maintain the "recommended" rating.

Risk hint: the risk of increased competition in the areas of vehicle networking and gene sequencing.