Key points of investment:
Performance has been growing steadily. The company announced its 2017 semi-annual report, with revenue of 270 million yuan, YOY +31.43%, net profit attributable to shareholders of listed companies of 46491 million yuan, YOY -52.7%, net profit after deducting amortization expenses of restricted stock incentive plans of 14.8062 million yuan, YOY +50.63%. Among them, the “Internet+Smart Logistics Cloud Service Platform” product was added, achieving revenue of 4,3783 million yuan and a gross profit margin of 72.51%. In recent years, the company's industry software gross profit margin is 60%, and the comprehensive gross margin is over 30%. Due to amortization of equity incentive expenses, the company expects to achieve cumulative net profit of -10 to -5 million yuan in January-September this year, YOY -152.50% ~ -126.25%.
Dig deeper into customer value. The company's main business is telecom operation support software, power enterprise management software, and financial asset management software. On the basis of operation support systems, the company continues to enhance innovative business cooperation with operators in ICT, Internet of Things and other fields. Currently, the company has become the core supplier of operation support systems for China Telecom, China Mobile and China Unicom, and related products are also used in the subsidiary companies of these three core customers. Furthermore, further cooperation has been carried out in the fields of electricity, finance, transportation, government, etc., and the core competitiveness has been used to steadily solidify the position of the industry.
Continue to increase investment in research and development. The company invested 56.623,900 yuan in R&D, an increase of 62.69% over the previous year. It is mainly reflected in two aspects: first, focusing on core technology research and development, relying on the company's many years of accumulation of big data, cloud computing and other technologies to establish the Central Research Institute; second, taking advantage of the technical advantages of the Chinese University of Science and Technology in the field of artificial intelligence, the “Highly Trustworthy Software Engineering Center” jointly established with the Chinese University of Science and Technology to promote the improvement of the company's technical level. Further, the company will change the “Electric Power Enterprise Integrated Management and Control Software Construction Project” and the “Enterprise Information Integrated Platform Construction Project” into “Big Data-driven Intelligent Application Software Projects” to provide solutions for telecommunications, energy and other industries.
Equity incentives were terminated, and large amounts of equity incentive expenses were amortized in the short term. The company incurred equity incentive expenses of 10.1571 million yuan during the reporting period, causing the company's net profit to decline. The company terminated the equity incentive plan in the third quarter, so it needed to speed up withdrawals in 2017, making it necessary to amortize share payments totaling about 31.163,300 yuan in the first three quarters of this year. At the same time, there are seasonal fluctuations in the company's business. Generally, the fourth quarter was the most, and there were relatively few in the first three quarters, so the company's short-term performance was under great pressure.
Profit forecasts and investment recommendations. R&D investment is accelerating, the main business is growing steadily, and the Internet+smart logistics cloud service platform is progressing steadily. The company's net profit from 2017-2019 is expected to be 0.49/0.90/111 million yuan, respectively, and the EPS is 0.23/0.43/0.52 yuan. It was pressured by equity incentive expenses in 17. However, based on the company's advantages over the years, the industry software field has blossomed a lot, and the emerging layout has also been continuously improved, giving a 56 times valuation in 2018, with a target price of 24 yuan for six months, maintaining the “increase in holdings” rating.
Risk warning: industry software competition intensifies, new business falls short of expectations