1. Event

The company released its 2019 semi-annual report. In the first half of the year, the company realized operating income of 186 million yuan, an increase of 28.37% over the same period last year, an operating profit of 24 million yuan, an increase of 59.06% over the same period last year, a net profit of 21 million yuan, an increase of 49.74% over the same period last year, and a net profit of 19 million yuan, an increase of 58.15% over the same period last year.

two。 Our analysis and judgment

1) performance growth accelerated and gross profit margin increased

In the first half of 2019, the company achieved an increase of 58.15% in net profit deducted from the same period last year, compared with 12.10% in the same period last year. The growth rate of net profit exceeds that of income, mainly due to a big increase in gross profit margin. The company's overall gross profit margin in the first half of the year was 47.36%, compared with 44.13% in the same period last year, an increase of 3.23 pcts. Implementation costs declined relatively. In the first half of the year, the company strengthened cost control and set up a localization implementation team. The proportion of implementation costs in operating costs decreased by 5.42%, while the proportion of commodity purchases increased by 6.27%. The amount received in advance in the first half of the year increased by 45.52% compared with the same period last year. Due to the complexity of large hospital projects and long consideration time, bidding is mostly concentrated in the fourth quarter, and the company's revenue is expected to be further released in the second half of the year.

In terms of expenses, the period expense rate was 35.16%, an increase of 3.1 pcts over the same period last year, mainly due to the impact of equity incentive expenditure, resulting in a 62.60% increase in management expenses. Investment in R & D continued to grow, up 27.05% over the same period last year.

Cash flow has improved significantly. The net operating cash flow increased by 19.10% over the same period last year, compared with-147.45% in the same period last year. The growth rate of receivables relative to income growth decreased slightly, up 18.15% from a year earlier, compared with 37.69% in the same period last year.

2) continuous efforts have been made in the fields of "smart hospital" and "city-level intelligent medical treatment", and the company has performed well in the development of large-scale intelligent medical projects. It has won the bid and started to build the intelligent information project of Jiangxi Children's Hospital Honggutan Hospital, the industry cooperation platform construction project of the third affiliated hospital of Air Force military Medical University, and a number of projects with a single amount of 10 million yuan or even hundreds of millions of yuan.

In terms of intelligent medical services involving multi-institutions, such as the Medical Federation, the Medical Community, and the Smart and healthy City, the "Urban brain-Shu Xin Medical treatment" project has been further promoted and applied throughout Hangzhou. After being approved to fully access the city's public medical institutions, it will connect and cover 245 medical institutions of all types in the city within 120 days. At present, the platform has an average of 2 million visits per day, and can provide life-cycle health file services including previous diagnosis, prescription, inspection, inspection and other information. In addition, the company has successively won similar projects such as Jiangsu Province liver Health Alliance Information platform Project, Guangyuan City resident Health Card Service Project, Qidong City "Internet + Medical and Health" project, to further expand the market area.

3) the new and old generation of hospital information system solutions continue to iteratively upgrade, the technical level of the company continues to improve the new generation of hospital information system independently developed by the company, further relying on the "seed customer" (Zhejiang people's Hospital), continue to deepen the application, optimize the process and explore the application of big data. In July 2019, Zhejiang Provincial people's Hospital was listed as a typical case of fine management of medical insurance in modern hospitals in China with the help of information technology to standardize clinical diagnosis and treatment behavior and reduce the rejection rate of medical insurance.

The company's new generation of hospital information system is an integrated solution for the core business of the hospital, which takes electronic medical records as the core and covers the traditional "HIS+EMRS+ Internet hospital". The system realizes the relative separation of R & D and delivery, the R & D is responsible for completing the development of the minimum functional units, and the delivery team is responsible for combining these minimum functional units according to the individual needs of users to form business workstations for all kinds of roles and departments, which can greatly reduce the cost of personalized development. Moreover, the system currently adopts an efficient, economical and secure hybrid cloud deployment model (private cloud core system + public cloud disaster preparedness system), which can flexibly meet the stable extension needs of collectivized hospitals and medical communities.

At the same time, the company also upgraded the solution of the previous generation of EMR (electronic medical records) integrated HIS (hospital information system), which can meet the overall HIS upgrade needs of old customers, and match the continuous updating needs of hospitals for rating evaluation, thus forming complementary technologies and product solutions with the new generation of hospital information systems.

3. Investment suggestion

The company mainly uses the general contract model to provide overall information solutions for large and medium-sized medical institutions. In the process of cooperation with the top third-class hospitals in China, the company has strengthened the grasp of the medical information needs of hospitals and the understanding of clinical business processes, and is rich in technical reserves in the field of clinical information.

The new generation hospital information system independently developed by the company is currently the largest new generation hospital core business system based on HTML5 and cloud computing technology in China, supporting cloud deployment, collectivized hospitals and medical couplet applications. Be optimistic about the technical advantages of the company's new generation hospital information system and its extensibility in the era of cloud computing. For the first time, it is given a "recommended" rating, and it is predicted that EPS 0.47 EPS 0.80 PE 60.6X/35.9X/27.1X in 2019-2021 is 1.06 yuan, corresponding to 2019-2021.

4. Risk hint

The risk that medical institutions' demand for large-scale programs is lower than expected. The risk that policy does not advance as expected. Liquidity risk caused by small current market capitalization.