I. Incident Overview
The company announced its 19th mid-year report on August 29, 2019. During the reporting period, the company achieved operating income of 546 million yuan, an increase of 11.91% over the same period last year; net profit attributable to shareholders of listed companies was 29.213,300 yuan, an increase of 104.90% over the same period last year, mainly due to rapid profit growth in Huawei's public cloud related business and mobile game business.
II. Analysis and Judgment
The HUAWEI CLOUD+ mobile game business developed rapidly, driving a significant profit growth rate. During the reporting period, Huawei's public cloud and mobile game related businesses developed rapidly, which contributed to rapid net profit growth. In the first half of 2019, the company used Huawei's public cloud collaboration as an opportunity to focus on expanding customers in the Internet industry, and on the basis of the existing Hunan market, it opened up three new markets in Henan, Shandong and Chongqing, achieving cloud service system revenue of 150 million yuan, an increase of 93.97% over the same period last year. At the same time, the company actively exploited the international market in the mobile game business and adjusted its distribution and operation strategies. Among them, the average monthly turnover of mobile games in the three countries of Hong Kong, Macao and Taiwan exceeded 10 million, ultimately achieving revenue from related businesses of 112 million yuan in the first half of the year, an increase of 74.65% over the previous year.
It has continuously won bids for national computer testing service projects. The leading position in the smart testing business has stabilized, and the company has continuously won bids and signed a number of national computer testing service projects during the reporting period, consolidating Haiyuntian's leading position in the country. While successfully completing the online college entrance examination and online evaluation technology services for the secondary school entrance examination, the company once again won bids for a number of national computer examination service projects, including the “2019-2021 National Unified Legal Professional Qualification Examination Computerized Examination Service Project”, the “2019-2021 National Accounting Qualification Examination System and related information technology construction projects, and a number of local evaluation technology service projects. Among them, the winning amount for the accounting qualification examination system and related information technology construction projects in China was 1,355 million yuan, consolidating Haiyuntian's qualification examinations for domestic computerized examinations and other qualifications A leading position in the field of application.
Strong channels and technical advantages ensure the steady development of the company
Strong channels and technical advantages ensure the steady development of the company. The company has the largest campus service channel in the country, covering 20 provinces, 110 cities, and a service operation team of nearly 2,000 people, serving nearly 30,000 primary and secondary schools and 18 million student and parent users. The college entrance examination serves 18 provincial education departments, with a market share of over 58%; the secondary school entrance examination services 140+ local and municipal education bureaus, with a market share of over 40%. At the same time, the company cooperated with Huawei to promote the construction of education informatization, striving to build a smart education cloud service platform, achieve collaborative development of B-side C-side business, and gain a card advantage in channel competition.
III. Investment Suggestions
Maintain a “Recommended” rating. Considering that the company's newly developed public cloud business is developing rapidly, mobile games are very popular in overseas markets, and the testing service business is developing relatively smoothly. Therefore, we expect the company's EPS for 19-21 to be 0.14/0.19/0.23, and the corresponding current PE price is 40X/29X/24X. Currently, Wind PE in the A-share software and service industry is 66X in 2019. The company's valuation is low and new businesses are developing rapidly, so it maintains a “recommended” rating.
4. Risk Reminder:
Industry competition intensified, and business expansion fell short of expectations