Focus of opinion
Investment suggestion
We downgraded Dashi Smart to "neutral" and lowered the target price by 9.6% to 4.07 yuan.
The reasons are as follows:
2018 and 1Q19 performance were lower than expected. In 2018, the company achieved an income of 2.53 billion yuan, a decrease of 1.8% over the same period last year, and a net profit of 220 million yuan, a decrease of 30.5% over the same period last year. The company realized an income of 410 million yuan, an increase of 9.5% over the same period last year, and a net profit of 20 million yuan, a decrease of 45.2% compared with the same period last year. The 2018 and 1Q19 performance were lower than expected, mainly due to a slowdown in income growth, a decrease in gross profit margin and an increase in expense rate.
The growth of medical business is slowing. The growth rate of the company's smart medical business revenue in 2018 was only 2.4%, which slowed sharply compared with 2016-17, mainly because the company's headquarters medical business revenue fell 41.6% compared with the same period last year, while the subsidiary Jiuxin medical income growth also slowed to 16.5%. We expect that with the confirmation of revenue from Taojiang and Huaian PPP projects, medical business is expected to pick up, but we need to pay attention to the impact of PPP on cash flow.
The construction business is expected to remain under some pressure. In recent years, the company has made a strategic adjustment, transforming from construction business to medical business. at the same time, the market is under some pressure in 2018, resulting in a 9.4% drop in smart building revenue in 2018 compared with the same period last year. We expect there will still be some pressure on the company's construction business in the future.
Smart transportation business is expected to grow rapidly. At a low base, the company's intelligent transportation revenue increased by 57.1% in 2018 compared with the same period last year. We expect that with the increase of subway bidding in the future, the company's intelligent transportation business is expected to grow rapidly, but at present, the transportation business accounts for a small proportion of the company's revenue (8.6% in 2018), which may have a limited impact on the company as a whole.
What is the biggest difference between us and the market? We are more cautious about the prospects for a pick-up in the company's business and more conservative about the company's reasonable valuation multiples.
Potential catalysts: upward catalysts for stock prices include better-than-expected performance recovery, edge computing, digital twins and other themes; downside catalysts are mainly lower-than-expected performance.
Profit forecast and valuation
As the growth of medical and transportation business is still difficult to offset the adverse impact of the slowdown in construction business in the short term, we have lowered our 2019 net profit forecast by 40% to 260 million yuan, while introducing a 2020 return net profit forecast of 310 million yuan (+ 20% YoY). The company's current share price corresponds to 30.9 times 2019e Pmax E, which is overvalued. We downgraded the target price by 9.6% to 4.07 yuan, corresponding to 30 times Ppace E in 19 years, which is 3.1% lower than the current share price, and downgraded to "neutral".
Risk.
The growth of newly signed orders was less than expected, and the progress of project implementation further slowed down.
