Matters:
The company released its 2019 mid-year report, achieving operating income of 259 million yuan, an increase of 5% over the previous year; net profit of 91.887 million yuan, an increase of 4% over the previous year.
Comments:
The cloud business is growing rapidly, and R&D efforts continue to increase. The company achieved revenue of 259 million yuan in the first half of the year, an increase of 5% over the previous year. The rapid increase in revenue was mainly due to rapid growth in cloud service business. The company's cloud service business revenue in the first half of the year was 45.274 million yuan, an increase of 142% over the previous year; at the same time, the cumulative number of paid enterprise users in the cloud service business reached 135,000, an increase of 22.7% over the end of 2018. At the same time, the company continues to rapidly promote the structural adjustment of R&D personnel, promote the transformation of software business R&D talents to cloud service business R&D talents, and strengthen cloud service business R&D efforts. The company's total R&D investment in the first half of the year was 66,183 million yuan, accounting for 25.5% of revenue; of this, the R&D cost of the cloud service business was 593.81 million yuan, accounting for 89.7% of the total R&D investment.
The channel partner layout continues to improve. Channel construction is a very important part of market development for small and micro enterprises. In the first half of the year, the company and its channel partners continued to carry out three series of marketing campaigns: “Operation Changjietong”, “Operation Changjietong God of War”, and “Operation Changjietong New Force” to enhance the terminal sales and service capabilities of channel partners. At the marketing level, strengthen the layout of marketing channels, and continue to carry out thousands of marketing campaigns with the themes of “Settlement and Payment”, “Financial Popularity Storm”, and “520 I Love Small and Micro Enterprises” to form effective brand communication in the terminal market and help terminal sales of products.
All major cloud products, such as Good Accounting, have made effective breakthroughs. In the first half of the year, the company actively expanded new business partners and entered platforms such as Alibaba Cloud, Huawei Cloud, and Tencent Cloud, all of which have achieved initial results. Cloud products such as Good Accounting, T+ Cloud, Good Business, and Easy Account have all passed the China Academy of Information and Communication Technology's Trusted Cloud certification. Among them, Good Accounting released tax inspection tools based on intelligent big data to help small and micro enterprises improve the level of tax management and reduce tax risks. At the same time, Good Accounting strengthened external ecological cooperation, completed the embedding of Alibaba Cloud DingTalk and China Mobile's cloud platform; established close cooperation with taxpayers such as Elephant Huiyun and Xiaowang Technology to achieve product integration; and expanded the breadth of cloud applications and marketing channels through ecological cooperation. With excellent product performance and channel capabilities, the number of new paid users of Good Accounting increased 99% year-on-year in the first half of the year, achieving a rapid breakthrough.
Investment advice: We maintain our forecast that the company's net profit for 19-21 will be 130 million, 159 million, 196 million yuan, and the corresponding PE will be 15 times, 12 times, and 10 times. Using the segmented valuation method, referring to the valuation of comparable companies in the same industry, the company's software business was given 14 times PE and the cloud business 12 times PS. The company's target market value in 2019 was 2.64 billion yuan, maintaining the target price of 12.2 yuan, and maintaining the “recommended” rating.
Risk warning: Market competition is intensifying; the macroeconomic situation affects IT expenses of small and micro enterprises.
