Event: the company released its semi-annual report for 2017, with revenue of 868 million yuan, an increase of 5.14% over the same period last year, and net profit of 15400 yuan, an increase of 9.77% over the same period last year.
Main points of investment:
On the basis of a high base, endogenous growth is maintained steadily, and it is expected to accelerate in the second half of the year. The company's revenue and profits increased by 67.5% and 274% respectively in the first half of last year, and the company still achieved endogenous growth this year on a high base. Among them, the revenue of the traditional core business intelligent conference is 245 million yuan, an increase of 35.22% over the same period last year. Apart from the fact that some projects of last year were postponed to the first half of this year, the sales of controllable intelligent conference products independently developed by companies have been increasing among military and government customers, and in the case of a substantial increase in scale, the gross profit margin has increased to 43.68% from 40.13% in the same period last year. It reflects the further expansion of the competitive advantage of the company's intelligent conference products. Smart City's revenue was 472 million yuan, down 1.50% from the same period last year. Although revenue was confirmed to have dropped slightly, contract orders continued to increase in the first half of the year. The revenue of online education is 18.2435 million yuan, down 33.47% from the same period last year, and the gross profit margin is down 13.78%. The decline in this sector is relatively large, mainly because the income has not yet been recognized in the first half of the year, and we expect the growth rate for the whole year to be no less than 30%. Big data's revenue in the first half of the year was 117 million yuan, an increase of 0.30% over the same period last year, and its gross profit margin decreased by 4.33%. Big data is the core strategy of the company's future development. At present, a relatively clear model has been formed in the three areas of precision marketing, public opinion and credit. The annual growth rate is expected to exceed 50%.
Operating profit increased by 23.1% over the same period last year, and cash flow improved. In the first half of the year, the company's operating costs, sales expenses, management expenses and financial expenses changed by 8.57%,-5.38%,-6.16% and-116.81% respectively compared with the same period last year. The obvious decrease in financial expenses is mainly due to a decrease of nearly 12 million yuan in interest expenditure compared with the same period and an increase of nearly 5 million in interest income caused by time deposits. The company's operating profit in the first half of the year increased by 23.14% over the same period last year, while revenue increased by 5.14% over the same period last year. The company's net operating cash flow is-32.6 million, compared with-172 million in the same period last year, and the cash flow situation has continued to improve since the fourth quarter of 2016. 2017 China reported a gross profit margin of 40.58%, down from 42.46% in the same period last year. We estimate that it is mainly due to some business fluctuations in Smart City.
Big data will be the core strategy for the long-term development of the company in the future, and is expected to derive a variety of business models. In the future, the company will take big data business as the core, intelligent conference, smart city, online education as big data application development direction and data channels. At present, the company has formed a relatively clear development model in the three areas of precision marketing, credit and public opinion. 1. Precision marketing: cooperation with China Southern Airlines has formed a relatively stable sharing fee model, which will be further promoted to more customers in the future. 2. Credit: previously, the provincial credit platform was established in cooperation with the National Development and Reform Commission, but it is now in the stage of collecting data pool and realizing data sharing. Benchmarking projects such as the construction of the credit system platform of Tibet Autonomous region, etc., the future credit platform is expected to derive a variety of non-project business models. 3. Public opinion: the company cooperates with Xinhua News Agency to analyze public opinion, which greatly enriches the company's Internet behavior data and lays a good foundation for the follow-up development of big data business.
Valuation and investment advice: the company's net profit from 2017 to 2019 is expected to be 6.04,7.71 and 1.017 billion yuan respectively, and its EPS is 0.42,0.54 and 0.71 yuan respectively. The current share price corresponds to a multiple of PE in 20-16-12, maintaining a "buy" rating.
Risk hint: the growth of intelligent conference business is not as sustained as expected; the progress of innovative business such as big data is slow.