Brief comment on performance
In the first half of 2017, the company realized operating income, operating profit and net profit belonging to shareholders of listed companies of 290 million yuan,-22.3346 million yuan and-16.6178 million yuan respectively, down 25.48%, 267.29% and 12.38% respectively compared with the same period last year. Achieve comprehensive dilution of EPS-0.03 yuan, lower than market expectations. The net cash flow of operating activities is-49.6993 million yuan, which is lower than the net profit of the same period. On a quarterly basis, the company's Q1/Q2 revenue fell by 27.22% compared with the same period last year by 23.84%, and its net profit grew by-14.71% by 44.00%. The company expects the net profit from January to September 2017 to be-12.0297 million yuan to-15.6386 million yuan.
Business analysis
A sharp drop in revenue is a drag on overall profitability. In the first half of the year, revenue fell sharply (- 25.48%). The gross profit margin of the main business fell sharply to 18.83% (- 11.03pct.). During the period, the expense rate increased 1.71pct. Among them, the rate of sales expenses and management expenses increased (1.58pct./1.36pct.), while the rate of financial expenses decreased by 1.23pct. Among them, the decrease in financial expenses is mainly due to the decrease in short-term loans. The net profit margin of homing is-6.41% (- 5.12pct.).
The printing business has maintained its market share, and the smart card printing business has made new progress. In terms of traditional printing business, the company continues to improve its business layout and has built five major printing bases in Beijing, Chongqing and Luzhou. While maintaining the market share of traditional printing business, the company is also actively exploring emerging business markets. Among them, books and magazines and high-end packaging business remain stable, and continue to open up new customers. In terms of smart card printing business, the company's related business has covered mainstream products such as financial IC cards, transportation cards, social security cards and resident health cards, and won the bid to become a business card printing contractor of Everbright Bank in April this year. In the future, with the continuous strengthening of market expansion, and at the same time, the company actively adjusts its product structure to reduce costs and increase efficiency, this part of the business is also expected to contribute new profit growth points for the company.
Acquisition of palm games and then strong lottery game research and development, will be increased investment to promote service capacity. In terms of lottery business, the company has obtained the "marketing service socialization" project of Ganzhou welfare lottery and the new media operation of Fujian welfare lottery, expanding the lottery services from printing and paperless consignment to offline operation and marketing services. At the same time, in May this year, the company announced that it planned to acquire Shenzhen Palm Game Technology Co., Ltd. for 536 million yuan. The palm game has a strong mobile game research and development capability, which will prompt the company to supplement the complete mobile game release and operation team, achieve business coordination between the two sides, and further improve the company's profitability in lottery games and mobile games. At the same time, palm games will provide release and operation support for the company's original games, enhance the company's ability to cash in lotteries and games, and enhance the certainty of the company's future performance growth under the background that the lottery industry policy is not yet clear. In 2016, the company raised investment through a private offering, "acquired 40% of the equity of Wuxi Ssangyong Information Paper Co., Ltd., and increased its capital for the" Lottery Internet of things Intelligent Management and Application Project "and the" Electronic Lottery R & D Center Project ". So far, the investment progress is 13.12% and 1.06% respectively, and it is expected that the two projects will be completed by the end of 2019.
Profit forecast and investment suggestion
The company's lottery printing business has a solid position, and the layout of the lottery system, games and paperless lottery sales is complete. As the paperless lottery policy is not yet clear, we maintain the company's 2017-2019 EPS forecast of 0.07 EPS 0.14 CAGR74.9% 0.20 yuan, (three years CAGR74.9%), corresponding to the PE score of 141-73-51 times, to maintain the company's "overweight" rating.
Risk factors.
Raw material prices and labor costs rise; lottery sales decline; lottery system and game research and development, consignment qualification identification and acquisition of uncertainty; palm game mergers and acquisitions and performance commitments do not meet expectations.