Main points of investment
Items:
The company publishes its third-quarter 2019 report. According to the report, in the first three quarters, the company achieved operating income of 521 million yuan, an increase of 70.94% over the same period last year, a net profit of 61.2 million yuan, an increase of 82.32% over the same period last year, and a non-return net profit of 52.68 million yuan, an increase of 240.98%.
Peace viewpoint:
Network security and integration business two-wheel drive, the company's revenue shows accelerated growth: since 2019, the company's traditional terminal security business and focus on the cultivation of system integration business have begun to promote the company's revenue. The company's revenue growth in the first quarter, the first half of the year and the first three quarters was 27.43%, 51.33% and 70.94% respectively, showing a significant acceleration trend. The terminal security business, as the main body of the company, continues to benefit from the security and controllable market. before that, a number of products have been included in the domestic adaptation list, and the related work is still accelerating in 2019. The system integration business made significant progress in 2019, and the related business advanced rapidly. The revenue growth doubled in the first half of the year and is expected to accelerate in the third quarter. In addition, the company's private cloud-based encrypted instant messaging product Source Doudou, which is currently being used in the government, military, financial and energy fields, is also generating incremental revenue for the company.
Gross margin is lower than the previous year, but performance growth is still strong: the terminal security business, as the company's main business, is very high because it is mainly delivered in the form of software. Since the beginning of this year, the system integration business has achieved rapid growth, but the gross profit margin in this area is low, pulling down the company's overall gross profit margin. In the first three quarters, the company's gross profit margin was 66.83%, 12.97 percentage points lower than the same period last year. However, during the period of the company, the cost control is better, which, to some extent, offsets the impact of the decline in gross profit margin on net profit. In the first three quarters, the company's sales expenses, management expenses and R & D expenses increased by 29.90%, 29.89% and 14.5% respectively, all of which were significantly lower than the growth of sales revenue. In the first three quarters, the company's net profit reached 61.2 million yuan, an increase of 82.32% over the same period last year.
The company actively arranges the localization business to enhance its competitiveness in the field of domestic terminal security management platform:
In addition to actively adapting to the major autonomous controllable machines, the company invested 234 million yuan of unused non-publicly raised funds to the research and development and promotion of the "security management platform based on trusted terminals". According to the company's plan, the platform will support multiple combinations of domestic mainstream processors, operating systems and databases. The project is currently close to the domestic security controllable strategic needs, to help existing customers to achieve the migration to independent controllable platform, enhance user stickiness, but also can add some customers, is expected to become a new growth point of the company.
Investment advice: according to the company's first three quarters report and the industry development forecast, we have adjusted the company's profit forecast. It is estimated that the company's EPS from 2019 to 2021 will be 0.11,0.14,0.17 yuan respectively, corresponding to the closing price of 70.2,54.7,45.5 times on October 28, maintaining the "recommended" rating. As a leading terminal security enterprise in China, Beixinyuan has typical software and product characteristics, a high degree of product standardization, and has been widely used in key industries such as government, energy, military industry, finance and other key industries. At present, the layout of the domestic trusted terminal management platform is being strengthened, and the development prospect is worth looking forward to.
Risk Tips:
(1) the risk of the decline of enterprise gross profit margin. Security and controllability is the main starting point for the implementation of China's "network power" strategy, the state may encourage more powerful enterprises to enter this field, industry competition may further intensify, and there is a risk of decline in enterprise gross profit margin.
(2) the growth of Information Source Doudou may not be as good as expected. Xinyuan Doudou is facing a more complex competition pattern, and there are strong competitors in different subdivisions. If enterprises fail to maintain continuous innovation and market development in the future, the promotion of the business may face resistance.
(3) the IT expenditure of government and enterprises is not as strong as expected. Under the downward pressure of the economy, downstream government and enterprise customers may have a decline or delay in IT expenditure due to financial constraints, which has a negative impact on the company's orders and revenue.