Event

On August 28, the company released its 2018 semi-annual report, with operating income of 708 million yuan, an increase of 12.33% over the same period last year, and net profit of 62.3243 million yuan, an increase of 5.50% over the same period last year.

Main points of investment

Radio and television software and hardware leader, performance has entered a new growth period

The company is a leading provider of software and hardware for radio and television digital television. due to factors such as the decline in the prosperity of the industry and the reduction of goodwill in 2017, the net profit of 36.5 million decreased by 84% compared with the same period last year. Since 2018, the company's performance has entered a new growth period, with operating income of 708 million yuan in the first half of the year, an increase of 12.33% over the same period last year, and a net profit of 62.3243 million yuan, 1.7 times that of 2017.

Smart terminal products performed brilliantly, with revenue increasing by 95% year on year.

With the rapid growth of operator IPTV business, the company's smart terminal product shipments continued to rise, with an increase of more than 60% over the same period last year, and shipped in operator markets in 13 provinces in the first half of the year. The company's intelligent gateways and terminal products achieved business income of 368 million yuan, an increase of 95.44% over the same period last year, accounting for 52.04% of revenue from 30.17% of 2017H1, driving the company's revenue and performance improvement.

The change of income structure leads to the decline of gross profit margin and the proper control of expense rate.

In terms of profitability, 2018H1's gross profit margin was 39.92%, down 4.57% from the same period last year, mainly due to the increase in the proportion of revenue from intelligent gateways and terminal products with a gross profit margin of 14.27% from 30% to 52%. The company's expenses were properly controlled, and the expense rate during the 2018H1 period fell to 32.63%, down 6.69% from the same period last year. Due to the decline in gross profit margin, the company's net profit margin fell slightly.

CA has entered the business cycle, DRM copyright protection is worth looking forward to

Driven by the high-definition intelligent replacement of set-top box and the upgrade of Guomi, the number of CAS smart cards issued in 2018-20 is expected to increase by 26%, 39% and 48% respectively, entering the business cycle. The company's CAS smart card has the first market share in China, and the first provincial state secret CAS project in the first half of the year will fully benefit the development of the industry.

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. The company is fully qualified, and the first one is recognized by ChinaDRM Lab, which is expected to open up new development space.

Profit forecast and rating

It is estimated that the return net profit of the company in 2018-20 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 53,37 and 26 times respectively.

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.