Items:
The company has cut into the smart power business and is actively expanding 5G base station power and other related projects.
Guoxin Chemical's viewpoint:
1) cut into the smart power business, the market space for high-end industrial equipment is large. The core products of the company's hardware plate are mainly intelligent lighting, intelligent power supply and intelligent control. The company's intelligent LED lamps and lanterns products adopt independent design and research and development technology, and the newly developed intelligent lamps and intelligent power lines have won the recognition of European customers. The demand for new orders from EGLO customers in the European market increased significantly in July 2019. The company provides brand customers with intelligent power supply and industrial control part of the engineering testing, manufacturing, supply chain management and other services, the company is a very important part of the application scene for high-end industrial equipment. Therefore, the company is also actively expanding 5G base station power and other related projects.
With the advent of 5G communication technology, the enhancement of cloud computing capabilities, the realization of primary artificial intelligence and the continuous maturity of sensor technology, the multi-dimensional technical bottleneck restricting the development of intelligent hardware has been gradually broken. With the related capabilities of intelligent power supply and industrial control accumulated in the process of serving existing customers, in order to welcome the arrival of the era of 5G and the Internet of things, the company is looking for more development opportunities in intelligent hardware components such as intelligent power supplies and sensors. At the beginning of 2019, the company has newly cut into Yihua, a high-quality customer in the field of financial technology in China, and has successfully completed the early stages of trial production, proofing and small batch production, and orders have begun to expand substantially in July 2019.
3) the smart marketing sector is in the period of transformation, upgrading and adjustment, and the cash flow continues to improve. 2019H1's smart marketing sector is still in the period of transformation and upgrading, and its performance has declined to a certain extent compared with the same period last year, but the operating cash flow of the company's three digital marketing subsidiaries has improved compared with the same period last year.
4) to open up the investment plate and bring good cash return to the landing of the strategy of production, investment and research is the main path of the company's strategic landing. Mai Meng Technology and Liudu Renhe invested by the company have successively completed a new round of equity financing in 2019H1 and introduced new investors, which, to a certain extent, reflects the full affirmation of its future value by the market, which is conducive to the long-term development of Mak Meng Technology and Liudu Renhe.
5) risk hints: risks such as lower-than-expected profitability, changes in fair value of investment targets, exchange losses, and so on.
6) Investment advice: be optimistic about the smart energy industry and maintain the "overweight" rating. It is estimated that the return net profit of the company in 2019-21 is 1.141max 2.06 million yuan respectively, the diluted EPS is 0.20max 0.24max 0.36 yuan, and the current stock price corresponds to PE 35.2 pound 28.4max 19.4x respectively. The company cuts into the smart power business and has a large market space for high-end industrial equipment. The technical bottleneck of the intelligent hardware plate opened, and the order volume of the company's financial technology products continued to increase. Open up the investment sector, production and investment research strategy landing to bring a good cash return, continue to maintain the "overweight" rating.
Comments:
Cut into the smart power business, high-end industrial equipment market space.
The core products of the company's hardware plate are mainly intelligent lighting, intelligent power supply and intelligent control. Intelligent LED lamps and lanterns products use independent design, research and development technology, the company's latest research and development of intelligent lamps and intelligent power supply and other product lines have won the recognition of European customers. In July 2019, the demand for new orders from EGLO customers in the European market increased significantly, which contributed to the steady growth of the company's smart hardware segment. With the related capabilities of intelligent power supply and industrial control accumulated in the process of serving existing customers, in order to welcome the arrival of the era of 5G and the Internet of things, the company will focus on looking for more development opportunities in intelligent hardware components such as intelligent power supplies and sensors.
The company provides brand customers with intelligent power supply and industrial control part of the engineering testing, manufacturing, supply chain management and other services, the company is a very important part of the application scene for high-end industrial equipment. In addition, the company is also actively expanding 5G base station power and other related projects. At the beginning of 2019, the company has newly cut into Yihua, a high-quality customer in the field of financial technology in China, and has successfully completed the early stages of trial production, proofing and small batch production, and orders have begun to expand substantially in July 2019.
The coordinated development of intelligent hardware and intelligent marketing. In the first half of 2019, the company achieved operating income of 356 million yuan, down 38.19% from the same period last year; net profit from home was 113 million yuan, up 69.61% from the same period last year; and net profit from non-return was 1 million yuan, down 89.94% from the same period last year. The company's net profit increased significantly, mainly due to the investment of Maimai Technology and Liudu people and the completion of a new round of financing, increasing the company's net profit by 91.9252 million yuan. According to the main composition, 2019H1's revenue from LED lighting products, digital marketing and consumer electronics accounted for 44.1%, 41.9% and 14.1%, respectively, and gross profit accounted for 52.1%, 38.5% and 9.4%, respectively. According to the business sector and products, 2019H1, in the company's intelligent hardware sector, the revenue from LED lighting products was 152 million yuan, accounting for 42.61%, down 27.78% from the same period last year; the revenue from smart hardware manufacturing products was 48 million yuan, accounting for 13.58%, down 57.86% from the same period last year; and in the intelligent marketing plate, the revenue from smart marketing services was 144 million yuan, accounting for 40.45%, down 38.40% from the same period last year. The continuous trade friction between China and the United States has led to a decline in the revenue of smart hardware manufacturing business compared with the same period last year; the intensification of competition in the digital marketing industry and the adjustment of customer budget structure have led to a decline in the volume of smart marketing services.
The company's intelligent hardware plate includes LED lighting business and intelligent hardware manufacturing business. (1) LED lighting business. The company's LED lighting business mainly includes the design, R & D, production and sales of LED intelligent lighting products and LED non-intelligent lighting products, providing lighting solutions for users; the sales model is divided into dealer mode and ODM mode; the business model is mainly according to customer orders to organize production and sales, and according to the contract or order agreement to collect sales payment; (2) intelligent hardware manufacturing business. The company provides brands with a series of services such as engineering testing, manufacturing and supply chain management of intelligent industrial equipment and other intelligent hardware products; the business model is mainly to organize material procurement, production and sales according to customer orders, and charge relevant service fees according to the contract or order agreement. 2019H1, the company's intelligent hardware sector continues to increase R & D investment, with technological innovation as the driving force, product research and development as the core, the development of products with independent intellectual property rights, positioning to become an intelligent hardware product solution provider, its intelligent manufacturing subsidiaries distributed in the Yangtze River Delta and Pearl River Delta, have established a modern R & D and production base. Through a series of technological innovations, the company's intelligent hardware production services have always been competitive in the industry. Through the product advantages have been cut into the ABL, EGLO, SSG and other international first-line customers of the supply chain system, the company has initially had the advantage of intelligent hardware products. The holding subsidiary Shiyida and Dianming Technology signed the Procurement Framework Agreement in August 2019 to sell products and provide services to Dianming Technology. In October 2019, the two sides signed the Strategic Cooperation Framework Agreement, which proposes to increase cooperation, including abolishing the limit of the cumulative amount not exceeding RMB 9.5 million and extending the transaction period to December 31, 2020.
Policy, technology and demand drive the rapid development of domestic intelligent hardware industry. Hardware intelligence has become the consensus of the whole society, and the prerequisite for the rapid development of the industry has been gradually formed. With the advent of 5G communication technology, the strengthening of cloud computing capabilities, the realization of primary artificial intelligence and the continuous maturity of sensor technology, the multi-dimensional technical bottleneck restricting the development of intelligent hardware has been gradually broken. Driven by policy, technology and demand, the domestic intelligent hardware industry is developing rapidly. The rapid development of intelligent hardware industry has brought new development opportunities to the company's intelligent hardware plate.
Intelligent hardware business is constantly exploring new business breakthroughs, and the demand for new customer orders is increasing rapidly. Smart hardware business segment, as a mature business segment of the company, its operating performance has been greatly improved in recent years, but since the second half of 2018, due to the continued influence of the global economic downturn and Sino-US trade frictions and other factors, the sales of the company's smart hardware segment are relatively weak, 2019H1, the company's intelligent hardware sector business situation has not been improved. However, the company has been looking for a breakthrough in the upgrading of intelligent hardware business since 2018. In addition to the currently mature electronic components and LED lighting products, the company's intelligent hardware plate is also promoting the R & D and project cooperation of other intelligent hardware terminal products, such as intelligent locks, Internet of things intelligent modules, financial technology products, and other intelligent hardware terminal products. New customers such as 2019H1 are still in the early stages of trial production, proofing and small batch production, and their contribution to the performance of the company's smart hardware sector is not obvious. The order demand from Yihua, a new customer for financial technology products, increased significantly in July 2019, and it is expected that it will become one of the main new customers in the smart hardware sector in the second half of 2019.
The company's smart marketing section covers three companies and five major business directions. The smart marketing section of 2019H1 is still in the period of transformation and upgrading, and its performance is still declining to a certain extent compared with the same period last year, but the operating cash flow of the company's three digital marketing companies has improved compared with the same period last year. The company's intelligent marketing business focuses on three digital marketing companies: Shunwei: control the risk of putting agency business, tap more budget potential of existing brand customers, and expand more high value-added but less creative and strategic business; Qishi: relying on the existing automotive industry's creative and strategic base business, extend to other industries to reduce the single risk of the industry. Li Xuan: reduce the proportion of pure delivery agency business, focus on brand customers' creative needs of social media, and increase the proportion of direct customers and creative strategy business. In addition, the company makes full use of the new opportunities, new businesses and new ideas contacted in the process of investment to upgrade the existing business of digital marketing, and pilot new business in some digital marketing subsidiaries to help digital marketing subsidiaries transform their existing business.
Open up the investment sector, production and investment research strategy landing to bring a good cash return. Production, investment and research is the main path of the company's strategic landing. Mai Meng Technology and Liudu Renhe, which are invested by the company, have successively completed a new round of equity financing in 2019H1 and introduced new investors, which, to a certain extent, reflects the full affirmation of its future value by the market, which is conducive to the long-term development of Mai Meng Technology and Liudu Renhe. In order to reduce the company's investment risk and maximize the enthusiasm of the team, 2019H1, the company agreed to Wuhu Jixin Tongda Enterprise Management Consulting Partnership (general partnership) to increase capital subsidiary Beijing Maida and waive the right to increase capital in the same proportion. Wuhu Jixin's main shareholder is the core management team of Beijing Maida, which is conducive to promoting the long-term development of Beijing Maida. In the future, the company will continue to pay attention to the innovative products in the field of smart hardware and smart marketing, make full use of the comprehensive advantages of listed companies, and strengthen the company's own R & D, technology and marketing capabilities through epitaxial investment and endogenous development.
Investment advice: continue to maintain the "overweight" rating. It is estimated that the net profit of the company in 2019-21 will be 1.14 billion yuan respectively. Diluted EPS=0.20/0.24/0.36 yuan, the current stock price corresponds to PE=35.2/28.4/19.4x. The company has cut into the smart power business, there is a large market space for high-end industrial equipment, the technical bottleneck of the intelligent hardware plate has been opened, and the order volume of the company's financial technology products continues to increase. The company opened up an investment sector, and the landing of the production, investment and research strategy brought a good cash return, and continued to maintain the "overweight" rating.
Risk hints: lower-than-expected profitability, changes in the fair value of the investment target, exchange losses and other risks.
