Key points of investment
Event: The company released its 2018 annual report, achieving operating income of 525 million yuan, an increase of 29.93% over the previous year.
The net profit of the mother was 54 million yuan, an increase of 24.08% over the previous year; after deducting the net profit of the mother of the mother was 51 million yuan, an increase of 23.8% over the previous year. Net cash flow from operating activities was $91 million, an increase of 221.21% over the previous year.
Revenue growth has accelerated as a result of offsite expansion. The company is a smart city industry solution provider. Its business covers the three major segments of people's livelihood, public safety, and smart cities. Since listing in 2017, revenue growth has accelerated. This stems from the company's active exploration of markets outside of Fujian Province, where revenue from outside the province already accounted for two-thirds in 2018. As the company continues to improve its national channel layout, it is expected that the potential for future growth will still be great. The company's disclosed orders and balance sheet inventory indicate that the company's revenue is still expected to grow rapidly in 2019.
The smart pension business is growing rapidly, and the potential is huge. Weishang Technology, a holding subsidiary, has independently developed software systems such as a smart pension information management system, a smart home care service platform, and an information management system for integrated medical care institutions. It has provided home care services for urban and rural communities in nearly 10 districts and counties including Ningde City, Zhangzhou City, Fuzhou City, and Wenzhou City. In 2018, Weishang Technology achieved revenue of 12.13 million yuan, an increase of about 120% over the previous year. In addition to this, the company invested in Fuzhou Yiying Health Technology Co., Ltd. for 18 years, holding 23% of its shares. Based on artificial intelligence and big data technology, eFilm Technology can provide customers with smart health services based on under-eye images.
Profit forecast and investment advice: We expect the company's EPS from 2019 to 2021 to $0.66, $0.83, and $1.06, respectively. Based on the future growth of the company's smart city and smart pension business, it was given a “prudent increase in holdings” rating.
Risk warning: Order execution pace is lower than expected, accounts receivable repayment risk, small risk of non-holdings reduction