Events:
The company released its 2018 results KuaiBao, which is expected to achieve an operating income of 984 million yuan (YoY-35.11%) and a net profit of 122 million yuan (YoY-24.86%). The performance is in the early forecast year-on-year change-30% / 20% in the central region, in line with expectations.
The optimization of business structure and the decline of 4G network construction scale are the main reasons for the short-term pressure on the company's performance.
In 2018, the company adjusted its business structure and disposed of non-strategic core businesses and businesses with relatively low gross profit margins, resulting in a decline in revenue and operating profit in 2018 compared with the same period last year. In addition, as 4G network construction has gradually come to an end in 2018, orders for 4G network planning and design have decreased compared with the same period last year, while 5G is still in the period of experimental site construction, large-scale investment and construction has not started, and 5G communications planning and design business has not yet been officially launched, the company's network planning and design business is under short-term pressure.
2019 is the first year of 5G, as a private design leader, the company is expected to benefit from 5G network construction.
The company's core business needs to provide integrated solutions from consulting planning, design, optimization to maintenance, with a higher threshold. We estimate that the investment scale of 5G network will reach 1.2 trillion yuan, about 1.5 times that of 4G period. The company's network planning and design business was recognized by domestic operators and enterprise customers during the 4G construction period, and the business revenue reached about 300 million yuan during the peak construction period. we expect the revenue scale of this business to reach about 500 million yuan during the peak period of 5G construction.
The company's Fuzhou Institute of Technology lays a solid foundation for the industrial layout of 5G and the Internet of things.
Fuzhou Institute of Technology was upgraded to an undergraduate applied university in 2015. Guomai Science and Technology 5G and the Internet of things business need a lot of engineer resources, and the college can reserve a large number of interns and enrollment sources for the company. it is expected to help the company's main business to develop rapidly in the future. In the future, the number of students is expected to reach 10,000,12,000, and the tuition fee is about 25,000 yuan / year. We expect the company's education business income to be stable at about 25,000-300 million yuan in the future. Recently, with the introduction of favorable policies for the vocational education industry and the sharp rise in Hong Kong stock higher education companies, we believe that there is a big gap in market expectations for Fuzhou Institute of Technology.
Earnings forecast and valuation rating.
Combined with the performance of KuaiBao, we reduce the company's 18-year return net profit forecast to 122 million yuan, maintaining the forecast of 2019-2020 net profit of 1.76 yuan and 246 million yuan. Combined with the valuation level of the comparable company in the 5G industry chain, we maintain the company's target price of 10.00 yuan (2019 PE 56X) and maintain the "buy" rating.
Risk hint: the progress of 5G network construction is not as expected, and the progress of the company's business transformation is not as expected.