occurrences
The company released its 2018 annual report. In 2018, it achieved operating income of 420 million yuan, an increase of 16.20% over the previous year; the net profit of the mother was 34.85 million yuan, an increase of 81.79% over the previous year; and net profit of the non-return mother was 34.72 million yuan, an increase of 96.60% over the previous year. At the same time, the 2019 quarterly report was released, achieving operating income of 82.12 million yuan, an increase of 8.64% over the previous year; the net profit of the mother was 10.27 million yuan, a decrease of 21.34 percent over the previous year; and net profit of the non-return mother was 10.22 million yuan, a decrease of 21.62 percent over the previous year.
reviews
Performance is lackluster, and the transformation results have not been clearly reflected financially
The company achieved net profit of 34,846,500 yuan in 2018, an increase of 81.79% over the previous year. Excluding asset impairment losses, the actual business growth rate was higher. 2018 was the first year in which the company's transformation began to reap benefits. Business growth was mainly contributed by B2B trading platforms and supply chain finance platforms. However, after the second quarter of last year, business was affected by financial tightening, and the pace of business development slowed down. The decline in performance in 19Q1 is also due to the high base of successful promotion of private platforms in the first quarter of last year. New business has not fully recovered in the first quarter of this year. It is expected that new business development will continue to improve starting in Q2.
Local government cooperation opens up capital bottlenecks, and it is expected that large-scale replication and accelerated performance release companies and the Bengbu local government will establish a guarantee service center, not only acknowledging the company model, but also opening up capital bottlenecks for the company. Taking the Bengbu cooperation as an example, considering only financing fees and SaaS service fees, the annual revenue is about 222 million, and the net profit is expected to be hundreds of millions. In addition to this, it may also bring in revenue from value-added services such as supply chain collection and logistics. Win-win cooperation with local governments is a model that is easy to replicate. If breakthroughs can be achieved in ten or so prefecture-level cities, the contribution of local government operations alone is expected to reach the order of 1 billion.
Long-term optimism is that the company will continue to improve the layout of the industrial Internet
The company's strategy for building an industrial Internet is clear, and I am optimistic that the company will continue to advance the “transaction finance strategy”, “logistics and warehousing strategy” and “e-commerce data strategy”. The company's current advantage lies in the breadth of industries it serves. Further development in the future can consolidate customer stickiness, increase single customer revenue, and expand new business models.
Investment advice
I am optimistic about the rapid growth of the company's supply chain finance business and the continuous implementation of the industrial Internet layout, but considering that the company's transformation results have been slow, the company's net profit for 2019-2020 was adjusted from 0.97/1.95 to /0.91/178 million yuan. The corresponding EPS was 0.36/0.71 yuan respectively, corresponding to P/E 79.06/40.43 times, maintaining the “buy” rating.
Risk warning: Local government cooperation fell short of expectations; business progress fell short of expectations; financial policy changes.
