Event: the company released the three-quarter report of 2018, the company achieved operating income of 3.707 billion yuan in the first three quarters, an increase of 282.35% over the same period last year; net profit belonging to the parent company was 262 million yuan, up 267.91% over the same period last year; and basic earnings per share was 0.35 yuan. The company expects full-year net profit to increase by 44.67% to 69.47% compared with the same period last year.
Comments:
Financial expenses increased significantly, and the net operating cash flow improved significantly. In the first three quarters of 2018, the company's operating income and return net profit showed a rapid growth trend, with year-on-year growth rates of 282.35% and 267.91%, respectively. During the period of the company, the proportion of expenses to income decreased significantly, with a decrease of 20.29Pct compared with the same period last year, mainly because the growth rate of revenue of the company was much higher than that of expenses; among them, the financial expenses were 124 million yuan, an increase of 403.22% over the same period last year, mainly due to the increase in interest on loans; sales expenses remained relatively stable, slightly up 4.79% year-on-year; and management expenses increased by 22.09% year-on-year. The company continued to increase investment in R & D. in the first three quarters, the company spent 134 million yuan on R & D, a substantial increase of 116.17% over the same period last year.
In the first three quarters, the company's net operating cash flow increased by 910 million yuan over the same period, an increase of 101.82% over the same period last year, mainly due to the increase in order rebates from the company's self-organizing network. The company signed a self-organizing network business order of more than 2 billion yuan in 2017 and more than 2.5 billion yuan in the first three quarters of 2018. The gradual landing of the order will bring performance growth for the company.
Ad hoc network products can be widely used in military, public safety, emergency scheduling and other fields, and are currently in a period of market explosion. We expect that the company's ad hoc network orders will maintain a good growth trend in the next few years. At the same time, the company is expected to expand high value-added integrated products, continue to improve plate income and gross profit margin.
Acquire part of AgJunction's business and enter the global precision agriculture market. Hemisphere GNSS, a wholly owned subsidiary of the company, intends to acquire part of the business of Canadian listed company AgJunction, including all the channels, brands, facilities and human resources of its Outback Guidance business. AgJunction is the world's leading provider of precision agriculture hardware and software solutions. After the acquisition, the company's strength in precision agriculture will be greatly enhanced, and the company's precision agriculture performance is expected to increase significantly in the next three years. We believe that at present, China's satellite navigation high-precision service is still in the stage of market introduction, and there is a huge space for development when the market conditions are mature in the future. The company's whole industrial chain layout Beidou high precision, and actively expand a number of downstream application markets, for the future development of the company to provide long-term growth power.
Earnings forecasts and ratings. The company's self-organized network order landing and public security business development have brought rapid growth in short-term performance, continuous strengthening of core technical capabilities, and the multi-field layout of Beidou's high-precision business will bring long-term growth momentum. We downgrade our profit forecast for the company. It is estimated that the net profit from 2018 to 2020 will be 384 million yuan, 506 million yuan and 631 million yuan respectively, the EPS will be 0.52,0.68 yuan and 0.85 yuan respectively, and the PE of the corresponding stock price will be 33 times, 25 times and 20 times respectively, maintaining the "buy" investment rating.
Risk tips: the business continuity of the independent network is not up to expectation, the market demand in areas such as public security is not as expected, and the maturity progress of the high-precision market is not as expected.