Introduction to this report:
Hengshi Technology released the 2019 Q1 report. Q1 revenue increased 21% and net profit increased 28% in 2019. The company's performance was in line with expectations. The high boom in the network planning and design industry and the extension of orders from private design institutes contributed to the increase in performance.
Key points of investment:
The “increase in holdings” rating was maintained, and the target price of 32.24 remained unchanged. The forecast revenue for 2019 and 2020 will remain unchanged, at 1,469 billion yuan and 1,821 billion yuan respectively. Considering the significant increase in management expenses and sales expenses in the first quarter, the 2019 and 2020 EPS were revised down to 1.03 (-21.3%) and 1.45 (-16.7%) yuan. The estimated revenue for 2021 was 2,258 million yuan, and the EPS was 1.87 yuan. Referring to the valuation situation of comparable companies, considering that 5G commercialization is accelerating, operators are increasing capital expenses, and industry sentiment and network planning and design demand continue to rise, Hengshi Technology was given a 31-fold valuation in 2019, maintaining the target price of 32.24 yuan, and maintaining the “increase in holdings” rating.
The two major business lines of intelligent big data applications and communication technology applications go hand in hand to promote “2+2+N”
Development strategy: Through the merger and acquisition of Liaoning Post and Telecommunication, technology complementarity, resource sharing and business replication in the two basic industries of electricity and communication have been achieved horizontally, the communication links of the intelligent big data industry chain will be completed vertically, and it will gradually expand to “N” industries such as transportation, finance, and agriculture.
After completing the acquisition of Liaoyou Post, market penetration continues to increase, and performance is expected to take off: Liaoning Post and Telecommunication Planning and Design Institute Co., Ltd. was included in the scope of the company's consolidated report in May 2018, injecting new vitality into the company's performance. Moreover, the risk of impairment has now been eliminated. In the future, lightweight packaging will accelerate the upward pace. The traditional business regions of the Liaoning Post and Telecommunication Design Institute are concentrated in Northeast China and North China. In 2019, the planning and design business covered the market from traditional Northeast China and North China to central and southwest China. The Liaoning Post and Telecommunication Planning and Design Institute won the two planning and design tenders for China Tower in 2019. The domestic market continued to penetrate, and market recognition increased markedly.
catalysts. 5G has brought about the expansion of the planning market; the market share of planning and design has increased.
Risk warning. Industry competition heightens risks; 5G investment falls short of expectations; risk of loss of goodwill.