Comments on the 2018 Mid-term report:
When the company released its 2018 semi-annual report, 2018H1 achieved revenue of 3.772 billion, an increase of 48.23%, and a net profit of 437 million, an increase of 100.42%, which fell into the upper limit of the performance forecast range of 83.38% and 101.72%, slightly exceeding expectations. The company's non-return net profit was 418 million, an increase of 130.86%.
The scale of the business is gradually expanding, and the global layout of Spigot has become large-scale. The company's two main businesses, Internet media business and digital business, have revenues of 1.034 billion (yoy+102.29%) and 2.635 billion (yoy+32.58%), respectively, and operating profits of 394 million (yoy+137.22%) and 60 million (yoy+42.62%), respectively. The domestic and overseas media business plate, which is composed of Spigot, FMOBI, Wanliuke and Applied Exchange, has achieved good results with strong technical barriers, high-quality brand customers and excellent business teams. the Internet media business continues to be strong, especially for overseas media platforms. 2018H1 SPE achieved a total net profit of 339 million, contributing 77.57% of the total net profit.
The cash flow quality of the two main industries has improved significantly, as the company has strengthened the control of accounts receivable. The net cash flow of 2018H1's operating activities was 98.07 million, an increase of 162.5%. The two main businesses other than the mutual fund business generated a net operating cash inflow of about 251 million. Because the mutual fund business was in the period of business expansion, the increase in lending business expenditure led to a net cash outflow of about 152 million yuan from the mutual fund business. On the whole, the operating cash flow of the main business shows a positive adjustment of optimization and improvement compared with 2017.
Intelligent technology creates differential competitive advantage to improve gross profit margin. The company's comprehensive gross profit margin is 18.77%, which is significantly higher than that in 2017. Internet media and digital marketing gross profit margins are 50.02% and 4.99% respectively, increasing 3.62pct and 0.31pct respectively. Other businesses include mutual fund business and game business, and gross profit margin is increased by 14.9pct to 57.85%. The improvement of the company's profitability is mainly due to the fact that the company is an algorithm-and big data technology-driven company, focusing on R & D to effectively reduce operating costs. We found that the company's management expenses increased by 83% and R & D investment increased by 85%. It is all due to the increase in R & D expenditure and personnel salary expenditure.
The existing business volume is bigger while looking for new performance growth points. In 2017, the company established an Internet micro-loan company and a factoring company, and established Tibet Zhidu Insurance Brokerage Co., Ltd. on August 8, 2018, in order to enrich the business model and promote the diversification of the company's income structure. enhance the overall business sustainable development ability and market competitiveness.
Profit forecast: the company's EPS in 18-20 is expected to be 0.89,1.11,1.40 yuan respectively, corresponding to 14 times, 11 times and 9 times of PE, maintaining a "buy" rating.
Risk tips: goodwill impairment risk; fierce market competition; customer churn risk.
