The company released its 2018 mid-term report that operating income increased by 19.31% year-on-year to 549 million yuan, net profit increased by 62.65% year-on-year to 71.71 million yuan, and net profit after deducting non-return increased by 28.64% to 52.42 million yuan.
Net Security business drives the rapid growth of the company's revenue. In terms of product revenue, in the first half of 2018, network security business increased 89% year-on-year to 19.88 million yuan; information security business increased 108% to 99.12 million yuan; and network capital management business increased 67.70% year-on-year to 160 million yuan. Public safety business and cultural and entertainment business have declined.
Financial indicators remain stable. The gross profit margin increased by 44.32% compared with the same period last year, the net profit margin increased by 2.92pct to 13.64%, the sales expense rate decreased by 0.35pct to 13.23% compared with the same period last year, and the management expense rate increased by 1.29pct to 21.33% compared with the same period last year.
Based on the pan-security solution provider, to create a comprehensive security product line. The company's network security business group mainly includes the Public Security Department, the Principal Business Department, the Network Security Division and the wholly-owned subsidiary Beijing Yahong. Provide public security big data solution, Internet bar product line, public opinion monitoring management, enterprise network security management and government network asset management. As the government increases its expenditure on information security, the company is expected to benefit from the high level of public security informatization.
Investment advice: we are optimistic about the company's layout of network security data governance in the future. It is estimated that the company's EPS from 2018 to 2019 will be 0.28 yuan and 0.35 yuan respectively, and the 6-month target price will be 8 yuan to maintain the investment rating of-A.
Risk hint: M & A companies can not fulfill their performance commitments; cyber security business progress is not as expected.