Items:
The company released its semi-annual report on August 22: revenue in the first half of 2019 was 1.066 billion yuan, up 21.53 percent over the same period last year; net profit returned to the home was 109 million yuan, up 11.52 percent over the same period last year; and 99 million yuan was deducted from non-net profit, an increase of 6.68 percent over the same period last year.
Comments:
Revenue growth increased, last year's base greatly affected the performance of net profit. Revenue in the second quarter reached 555 million yuan, an increase of 29.30% over the same period last year, significantly higher than that in the first quarter; net profit attributable to 57.2294 million yuan, up 8.68% from the same period last year. The low growth rate of net profit was mainly due to a higher base in the same period last year (net profit attributable to the second quarter of 2018 increased by 86.26% compared with the same period last year, significantly higher than the other three quarters). In the first half of the year, the gross profit margin was 33.57%, an increase of 1.54% over the same period last year, the sales expense rate was 3.59%, and the management expense rate and R & D expense rate were 7.69% and 8.46%, respectively. During the period, the expense rate has increased, which is mainly due to the increase in employees' salaries. Considering the large proportion of revenue in the second half of the year, the expense rate is expected to decline during the period.
The growth of financial science and technology is steady, and the informatization of intelligent terminals has a strong momentum. Revenue from financial technology services reached 604 million yuan, an increase of 11.82 percent over the same period last year, including professional delivery, solutions, and technology operations.
In terms of professional delivery, it has continuously improved the function and performance of automatic delivery tools, and the delivery efficiency and core competitiveness have been continuously improved; in terms of solutions, it has completed the research and development of "a new generation of distributed financial core system" with Ant Financial Services Group. And take the business platform as the core basis, continue to launch financial technology solution products and operation platform, and further improve product coverage. In terms of science and technology operation, the "Internet financial business" operation platform business is advancing steadily. The revenue of intelligent terminal informatization reached 258 million yuan, an increase of 87.84% over the same period last year, and the growth rate increased significantly, making it the most important source of increment. Based on the existing chip and end device development, artificial intelligence, cloud computing, big data and other technical capabilities, the company has opened up the capability of full-stack IoT solution from end to cloud and from technology to application, and gradually possessed comprehensive intelligent Internet of things solution and comprehensive service capability of software and hardware integration from chip to application. With continuous research and development in chip and edge computing capabilities, the HiHope,HiHope AI open source community, a new generation of AI computing platform, has worked closely with industry top chip vendors and operating system vendors, including Huawei Hayes, Renesa Electronics, Suoxi Electronics, Google, Texas Instruments Inc, Infineon, Microchip, NXP, etc., and is the strategic partner of Huawei Hayes, the exclusive strategic partner of Renesa Electronics in China, and the global top partner of Google Android TV. And launched 9 high-performance AI development platforms, intelligent driving solutions have also made important progress. Smart energy informatization achieved revenue of 100 million yuan, an increase of 26.94% over the same period last year, maintaining the momentum of rapid growth. By introducing the EC-IoT open platform architecture of the Internet of things, the company continues to improve the "intelligent power distribution Internet of things" solution, and the core competitiveness of the smart energy field is further enhanced.
Investment advice. The rapid growth of corporate expenses will still have a certain impact on the net interest rate. at the same time, the strategic contraction of the company's non-core business will also have a certain impact on the net interest rate. To sum up, we downgrade the company's attributable net profit from 2019 to 2021 to 383 million yuan, 513 million yuan and 656 million yuan respectively (the previous value is 413 million yuan, 540 million yuan and 687 million yuan respectively), and the corresponding PE is 33 times, 25 times and 20 times respectively. With reference to comparable companies, we give the target PE 30 times in 2020, raising the target price to 19.32 yuan per share (16.21 yuan per share before the increase) and maintaining the "recommended" rating.
Risk hint: new business expansion does not meet expectations, goodwill impairment.