Lion Technology was founded in 1996, started from the construction and design of Xinjiang communication network, entered the field of security in 2008, and is the top three supplier of system integration solutions in Xinjiang. In January 2019, the acquisition of freshman interconnection and Wochi Technology was completed, forming four major business contents: communications engineering, security system engineering, IDC data service, and value-added telecom operators, building comprehensive service capabilities from infrastructure construction to content distribution, and a high degree of cooperation among sub-businesses, which also enabled the company's business to radiate to a wider area geographically.
Driven by 5G, multi-service is expected to benefit. 5G's performance drive for the company comes from many aspects: 1) in the Internet of everything era, the boundary of security application scenarios opens, expanding to smart cities, smart campuses and other scenarios; 2) operators increase the construction of 5G, and the demand for communication services increases; 3) the significant growth in the amount of data will increase the demand for IDC data services. As a competitive technical service provider in the industry, the company is expected to benefit.
Layout MCN, showing a bright spot of performance growth. The company has been laid out in the MCN field for a long time and has mature business capabilities, which is different from the traditional live broadcast. By undertaking the upstream advertising master budget, part of the company is used for its own digestion, and some is sent to small and medium-sized MCN institutions to have the ability to digest large orders. Benefiting from the trend of live streaming, MCN business is expected to grow.
Investment suggestion: based on the original business, the company has the ability of continuous iterative extension and layout, and there are many new opportunities in the 5G era. We expect the above capabilities to have a certain first-mover advantage. Considering the great potential of value-added services in the current 4G to 5G transition period, we believe that the flexibility of the company's performance growth is more prominent. We expect the return net profit of the company from 2019 to 2021 to be 122 million, 273 million and 383 million respectively, and the corresponding EPS is 0.43,0.97,1.36 yuan. Medium-and long-term benefit 5G performance flexibility, short-term layout MCN increase significantly, with a certain valuation premium, we give the company a "buy-A" rating.
Risk hint: the pace of 5G is not as fast as expected, the security engineering business development is not as expected, and the growth of MCN and mobile reading business is not as expected.