Main points of investment
Radio and television software and hardware leader is expected to enter a new growth period
The company is a leading provider of software and hardware for radio and television digital television. due to the decline in the prosperity of the industry and the reduction of goodwill in 2017, the net profit decreased by 84% in 36 million compared with the same period last year. We believe that 2017 is the bottom and the company is expected to enter a new period of growth. In March 2018, a restricted equity incentive scheme was implemented to demonstrate confidence in development.
Investment in radio and television is expected to increase to consolidate the company's performance foundation.
In the face of competition from IPTV and OTT services, CATV's market share fell to 52% in 2015, forcing the development of radio and television. The compound growth rate of radio and television capital expenditure in 2017-17 exceeded 25%. The implementation of network-wide integration is expected to lead to more investment. At present, more than 50% of the company's income comes from radio and television, and the investment in radio and television ensures that the company's performance is secure.
CA ushered in a business cycle, which will become the driving force of performance growth.
In 2017, the company's CAS smart card market share has surpassed Yongxin Visual Expo to become the first in China, reaching 41%. Driven by the expiration of the life of the stock card, the high-definition intelligent replacement of the set-top box, and the upgrade of the state secret, the demand for CAS smart cards in 2018 has entered a boom cycle. We estimate that the number of CAS smart cards issued in 2018-20 will be 1542, 2139 and 31.55 million respectively, an increase of 26%, 39% and 48% respectively over the same period last year. As an industry leader, the company will fully benefit from the development of the industry by being the first provincial state secret CAS project in the first half of the year.
Digital copyright is facing an outbreak, DRM opens the space for development
With the establishment of an intellectual property office by the state, the digital property rights protection industry is facing great opportunities for development. Guangzhou Electric Power has promoted DRM, and the industrialization process is constantly advancing. It is estimated that the global market CAGR will reach 15% in 2018-26. CCTV 4K Ultra HD Channel will be broadcast on October 1, 2018, and 4K is expected to catalyze the application of DRM. The company is fully qualified, and the first one in China has been recognized by ChinaDRM Lab, which is expected to open up a new space for development.
Other radio and television, telecommunications and financial services are steadily increasing.
Other services such as radio and television, telecom intelligent terminals, financial services and applications, and customization of special needs show a trend of steady development.
Profit forecast and valuation
It is estimated that the return net profit of the company from 2018 to 2020 is 99 million yuan, 143 million yuan and 206 million yuan respectively, the EPS is 0.07,0.10 yuan and 0.14 yuan respectively, and the corresponding dynamic price-to-earnings ratio is 51,35,24 respectively. The company's performance has entered a new growth period, with an average annual compound growth rate of 78% in the next three years, giving an "overweight" investment rating for the first time.
Risk Tips:
The investment in the radio and television industry is not as strong as expected, and the number of CAS smart cards issued is not as expected.
