Main points of investment
Event: in the third quarter of 2019, the business income of 263 reached 261 million yuan, an increase of 2.99% over the same period last year, and the net profit of returning home was 27 million yuan, down 5.94% from the same period last year. In the first three quarters of 2019, operating income reached 771 million yuan, an increase of 14.2 percent over the same period last year, and net profit reached 92 million yuan, an increase of 32.39 percent over the same period last year.
Operating income increased steadily, profits maintained overall growth: in the third quarter of 2006, operating income increased steadily in a single quarter, although profits declined, it did not affect its long-term profitability. We believe that under the guidance of the "video +" strategy, the 263rd enterprise communications business will steadily increase as the company continues to explore the integration of new products and various application scenarios, and forms different solutions in various industries.
Slight pressure on expenses and cash flow: in the third quarter of 2019, sales expenses were 44 million yuan, an increase of 0.23% over the same period last year; company management expenses (including R & D expenses of 30 million yuan) were 70 million yuan, down 9.09% from the same period last year; and financial expenses of the company were-3.4 million yuan, an increase of 43.21% over the same period last year, mainly due to the decrease of interest income caused by the decrease of time deposits and the decrease of exchange loss caused by the rise of exchange rate. The net cash flow generated by the company's operating activities in the first three quarters of 2019 was 0.82 yuan, down 8.3% from the same period last year. Cash flow is slightly under pressure and needs continuous improvement.
To meet the needs of one-stop communication, the three major business lines have coordinated development: 263 uses Internet technology and resale methods to provide enterprises with omni-directional and one-stop communication products and services. the establishment of the three major business departments of 263 makes it easier to coordinate the supply, production and marketing of various business sectors, and the division system is more conducive to the organization of specialized production and the realization of internal cooperation among enterprises. The comparison and competition among various business departments are also conducive to the development of enterprises and personnel training, so that the company has entered a stage of stable and rapid development.
Earnings forecast and investment rating: we expect the company's EPS from 2019 to 2021 to be 0.12,0.16,0.20 yuan, and the current share price corresponds to a "buy" rating of 47ta 36max 29X, respectively.
Risk tips: the easing of Sino-US trade frictions is lower than expected, the progress of video technology research and development is not as expected, and the risk of core customer loss.