Performance review
1H17 performance meets expectations
Leo AG announced interim results for 17 years: operating income of 4.578 billion yuan, an increase of 49.38% over the same period last year; net profit belonging to the parent company was 319 million yuan, an increase of 16.90% over the same period last year, corresponding to a profit of 0.06 yuan per share. Performance growth fell into the previously forecast range of 10-40%. The company expects the net profit from January to September to be 436-566 million yuan, an increase of 0-30% over the same period last year.
Trend of development
The smart network also showed that digital marketing revenue increased by 60% compared with the same period last year, and the competition intensified the decline in gross profit.
During the reporting period, the revenue of digital marketing was 3.529 billion yuan (YoY+66.25%), accounting for 77.1% of the revenue. Excluding the factor of intelligent interest (consolidation since September 2016), the business scale increased by 50.5% compared with the same period last year. Gross profit margin is 14.59% (YoY-5.95pct), mainly due to increased competition in the industry, the company increased market share and remained competitive at the expense of gross profit margin.
At the same time, due to more stringent policies on business expansion and media settlement, the cash flow of operating activities fell by-413%, with an outflow of 184 million yuan.
The achievement degree of Wansheng Weiye and minimally invasive era is relatively high, and there may be pressure on the completion of intelligent network profits. The net profit of Wansheng Weiye / minimally invasive era / Zhifun Network 1H17, which is still in the performance commitment period, is 150 million yuan (+ 36%) / 40.22 million yuan (+ 12%) / 19 million yuan respectively, and the degree of performance completion is 65%, 43%, 25%. After Zhiqu retroactive adjustment, FY16 deducts non-net profit of 32.24 million yuan, and the completion rate is 71.1%. There may be pressure on the completion of the promised net profit of 75.4 million yuan.
Digital marketing industry chain is complete, focusing on traffic to expand the volume of business. The company has completely covered the digital marketing service chain through mergers and acquisitions, while focusing on the flow layout of vertical industries such as games, film and television / medical care, and steadily expanding the volume of business in the face of intensified market competition.
In the short term, the intensified market competition makes the profit growth rate lower than the scale growth rate, but the comprehensive service capacity and rich customer resources enable the company to achieve steady profit growth in the long run. In addition, the company announced to adjust the issuance scale of convertible bonds to 2.198 billion yuan (originally 2.948 billion yuan), taking the initiative to reduce the size is conducive to the rapid promotion of issuance. After the funds arrive at the account, it will meet the capital needs of the company and help the business to develop healthily.
Profit forecast
Due to the decline in gross profit margin, the company reduced its 18-year net profit from 780 million yuan / 1.002 billion yuan by 10.31% to 700 million yuan / 842 million yuan respectively.
Valuation and suggestion
At present, the company's share price corresponds to the 18-year price-to-earnings ratio of 17amp at 24X/20X. The original target price was adjusted to 4.85 yuan after 10-to-25 conversion. Taking into account the downward performance and downward valuation, the target price was lowered by 22.7% to 3.75 yuan, corresponding to the 18-year price-to-earnings ratio of 17LX 30X/25X. Maintain the recommended rating.
Risk.
The competition in the digital marketing industry intensifies, the performance of the acquisition company falls short of expectations, and the goodwill impairment risk.