Event: the company released its annual report for 2018, with annual revenue of 4.42 billion yuan, an increase of 47.84% over the same period last year, and net profit of 71.697 million yuan, a decrease of 29.72% over the same period last year. The gross profit margin was 17.65%, down 12.4% from the same period last year.
With the rapid growth of revenue, the net profit of the company has declined in the transformation. After the completion of the acquisition of Longshang Technology and Xintong, the annual revenue was greatly increased, but the return net profit decreased by 29.72% compared with the same period last year, which was lower than expected, mainly due to the 35.18 million goodwill impairment of the acquisition of Ruiyan Communications and the reduction of business income as a percentage of completion. Taking into account the decline in inventory prices and bad debts, R & D investment and financial expenses increased significantly for the whole year. In 2018, the company invested 186 million yuan in R & D, an increase of 134.43% over the same period last year, indicating that the company attaches importance to R & D and improving its technological strength; the financial cost is 73 million, an increase of 1015.26% over the same period last year, mainly due to the company's increase in bank loans for acquisition and operation.
Overall, the follow-up impact of the decline in profits is limited, and the increase in R & D investment in the gradual transformation of the company will also enhance the competitiveness of the company's products, and it is still optimistic about the company's prospects in the AIoT era.
The revenue of the Internet of things industry has greatly increased, and it has been rapidly transformed into an artificial intelligence Internet of things company. The annual revenue of the Internet of things industry of the company was 2.092 billion yuan, a year-on-year increase of 2776.39%, while the revenue of the communications industry was 2.328 billion yuan, down 20.20% from the same period last year. With the decline in operator capital expenditure in 2018, the revenue of the corporate communications industry has declined. at the same time, the income of the Internet of things industry is growing rapidly, accounting for nearly half of the total revenue. Following the development direction of the country's emerging industries and the development trend of communication technology, the company acquired Longshang Technology (73.84%) and Xintong (100%) respectively in 2017 and 2018, established the AIoT development strategy, continuously introduced global talents, formed the integrated service capability of Internet of things, artificial intelligence and big data analysis, and made a rapid transformation from traditional communication industry to artificial intelligence Internet of things.
"Cloud + end + solution + AI", from Internet of things to smart life. On the cloud side, the company promotes the cloud from the PaaS layer to the SaaS layer, card data entry, serving various vertical industry solutions; on the end side, the company has the first Internet of things module shipped in the world, and launched the world's first intelligent cloud module in May last year, and set up a Rihai smart terminal in October to serve smart cities and smart homes. On the solution side, the company has implemented Internet of things solutions or pilot projects in Shanghai, Hebei, Yan'an, Dalian and many other cities, such as smart city, smart transportation, smart agriculture, etc., and become a competitive solution provider in the Internet of things industry. On the AI side, the company combines artificial intelligence with the Internet of things and launched the world's first AIoT mobile intelligent computing terminal MICD product on MWCS 2018 in June, which gives AI to the Internet of things products and promotes the company to move from the Internet of things to a smart life.
Profit forecast: from 2019 to 2021, EPS is expected to be 0.85, 1.00 and 1.19 yuan respectively, maintaining the "overweight" rating, with a target price of 28.8 yuan.
Risk hint: Internet of things business growth is not as expected, module competition is intensified; 5G development is not as expected.