On January 17, the company issued a performance forecast for 2019, which is expected to reduce net profit by 65.75% year-on-year and 72.83% after deducting non-profit. Due to the high cost, the performance was lower than expected. It is expected that the annual revenue will increase as well, and the performance in 2020 will be significantly affected by the R & D transformation effect. After the pre-reduction, the estimated value is raised and adjusted to increase the holding rating.
Support the main points of rating
Q4 improved and was still lower than expected for the whole year. (1) according to the median (the same below), the net profit for 2019 is 100 million, which is lower than the consistent forecast. (2) Q4 achieved a net profit of 77 million (- 58%), better than the level of the previous three quarters (- 84%). (3) on the revenue side, if Q4 keeps the growth rate of Q3 at about 15%, it is expected to achieve about 2.77 billion revenue (+ 13%) for the whole year.
High investment in R & D is the main reason for the same reduction. Under the income growth, the higher-than-expected growth rate of R & D investment is the main reason for the pressure on performance (the decline in gross profit margin is another reason). From 2016 to 2018, R & D spending growth averaged 66% of the revenue side, while investment in 2019 is likely to reach 700 million (estimated in the first three quarters), 160% of the revenue side. Assuming that the growth rate of R & D in 2019 is the average of the previous three years, the cost can be reduced by about 70 million yuan, accounting for 70% of the net profit.
Whether the R & D investment direction can be effectively transformed indicates strategic investment in converged communications, AI ultra-low-light technology, Taiwan software, mobile products and application platforms. Take converged communication as an example, which is used in emergency command, large-scale video conference and so on, and is expected to land in coordination with existing services. The overall transformation effect of each innovative business remains to be seen.
Valuation
(1) under the neutral estimate, the net profit in 2019-2021 is adjusted to RMB 1.0 billion, EPS is 0.20, and PE is about-70%, which is equal to the level of the plate. (2) according to the optimistic estimate, if the R & D share returns to the 2018 level after 2020, the EPS is expected to reach 0.50 amp 0.66 yuan next year, and the PE is 24App 18 times, which means that the R & D conversion can quickly digest the valuation under ideal circumstances. (3) to be prudent, adjust the rating from buying to overholding based on neutral estimates.
Main risks faced by rating
The R & D transformation is not as expected; the project progress is lower than expected; personnel turnover.
