Core viewpoints
The advertising marketing market has grown steadily, with Internet marketing as the main driving force. In 2016, the scale of Internet marketing in China reached 290.3 billion, an increase of 32.9% over the same period last year, and the growth rate was much faster than that of other media. Internet marketing accounted for 68% of the total advertising market in 2016, which is the main driving force of the marketing industry. In 2016, the mobile Internet advertising market reached 175 billion, an increase of 75.4% over the same period last year, accounting for 60% of the online advertising market share.
Lianchuang is firmly committed to the transformation of interconnection, focusing on Internet marketing.
Since 2014, the company has been actively seeking cross-industry extension development by using the platform of listed companies, gradually completing the acquisition of Internet advertising companies Shanghai Xinhe, Shanghai Jianchuang, Shanghai Lindong and Shanghai Ventures, while the company has spun off traditional chemical non-profit projects and went all out to create a "Lianchuang digital" business plate with the whole industry chain of Internet marketing. The net profit of the company belonging to the parent company in the first half of 2017 was 130 million yuan, an increase of 54.3 percent over the same period last year. The company issued a forecast for the first three quarters of 2017. The net profit of the company belonging to the parent company in the first three quarters of 2017 is expected to be 2.25 to 270 million yuan, an increase of 39.75 percent 67.71 percent over the same period last year.
The future industrial chain is expected to extend, the layout of IP and media resources companies launched the IPO in June 2016 (and then stopped due to market factors), but we judged that the layout of IP and media resources are an important part of the future development strategy. This logic has been confirmed by the acquisition of Shanghai IP in September 2017. We believe that the company will still lay out the downstream industry and IP in the future, and the interconnection will closely follow the industry development path. Improve and consolidate the whole industry chain of Internet marketing.
For the first time, it covers the investment rating of "increasing holdings" given to Lianchuang Interconnection.
Since the transformation, the company has been actively carrying out strategic layout around the Internet marketing industry, at the same time, the pace of industrial transformation is accelerated, and it is expected to further consolidate its core competitiveness through investment mergers and acquisitions. We estimate that the company's operating income in 2017, 2018 and 2019 is 31.5,39.3 and 4.72 billion yuan respectively, net profit is 3.2,4.4 and 570 million yuan respectively, EPS is 0.55,0.74 and 0.96 yuan per share, corresponding PE is 28.8,21.1 and 16.3 times, respectively.
Risk hints: performance commitments fall short of expectations; industry competition intensifies; policy risk; systemic risk.