Main points of investment
Event: the company announced its performance in 2018, KuaiBao, with revenue of 3.59 billion yuan (+ 204%) and net profit of 210 million yuan (+ 351%) in 2018. Internet advertising has become the main source of performance growth.
Internet advertising business continues to expand, driving rapid revenue growth. Due to the merger of giant network technology in November 2017, the comparable base for the same period in 2017 is different. Assuming that giant network science and technology has been consolidated for the whole year, 3D communications 2017 will achieve annual revenue of 1.75 billion yuan and return to its mother net profit of 120 million yuan. As a result, in fact, 3D Communications's revenue in 2018 increased by 105% compared with the same period last year, and its net profit increased by 72% compared with the same period last year. After deducting the 65 million yuan earned from the transfer of some properties in 2018, the company's net profit increased by about 20% year-on-year.
The company's Internet advertising business is expected to continue to grow rapidly in 2019. The company's Wechat medium and long tail ecology: at the end of February 2019, the 2019 regional and medium-long tail channel service providers meeting of "Joint growth" of Tencent advertising was held, and Giant Network Technology became one of the 9 "2018 breakthrough service providers". Its wholly-owned subsidiary Mengzhou Culture has become one of the 8 "2018 excellent service providers", and the company's position in the Wechat advertising ecology has been further improved. QQ.com 's information shows that in 2018, Tencent advertisements officially opened the channel to sink, which was rapidly distributed nationwide, driving regional and medium-and long-tail business to achieve more than 100% growth, and building up comprehensive strength for 19 years. At the same time, Tencent Advertising announced its business strategy and development goal for 2019: in 2019, Tencent Advertising will focus on the three major tracks of direct e-commerce and self-media, SMB and LKA effect, and LKA brand. The company will benefit directly from Tencent's social advertising and self-media advertising, which serves small and medium-sized enterprises.
Actively adjust the excellent service of the communication network and cut into the investment of 5G infrastructure. The company's original network excellent business in the industry is more mature, fierce competition, the company has maintained the previous revenue and profit volume. The company began to invest in 5G infrastructure in the second half of 2018, and positive progress may be made in 2019. At the same time, the company is actively developing new products and solutions for 5G to meet the construction needs of operators, and is expected to enter the market after the completion of 5G infrastructure construction.
Profit forecast and investment advice. It is estimated that the return net profit of the company from 2018 to 2020 is 2.13 pound 2.45 / 434 million yuan respectively, and the EPS is 0.39 pound 0.44 plus 0.78 yuan respectively. We believe that the company's performance evaluation target in 2019 is 220 million yuan, and the performance commitment of Juwang Science and Technology in 2019 is 170 million yuan, the company's performance may be guaranteed. The company is the scarce target for the realization of social advertising for Wechat traffic in the A-share market + self-media advertising, and the communications business is expected to take a piece of the pie in the early and late stages of 5G infrastructure construction and maintain a "buy" rating.
Risk tips: the performance of the subject matter of M & A may fall short of expectations, the risk that Wechat may control the company's traffic, the progress of communications business may fall short of expectations, and the promotion of 5G infrastructure may fall short of expectations.
