In 2019, the company realized revenue / operating profit / net return profit of 1.324 million yuan, 0.22 billion yuan, compared with the same period last year, which was-0.57%, 108.15% and 108.79%, turning losses into profits. Q4 compared with the same period last year + 41.7% Universe 99.7% Universe 100.4%, the performance exceeded expectations. In 2019, the company's traditional LED lighting business revenue declined due to the reduction of government debt, the company took the initiative to shrink and other reasons, while the emerging IDC and cloud computing business maintained steady growth, the company's overall revenue remained stable, and the comprehensive gross profit margin was increased to turn losses into profits. Continue to be optimistic about the continued optimization of the company's business structure and the steady growth of cloud / IDC business, maintaining the "buy" rating.
The growth of IDC and cloud business offset the decline of traditional business, and the company's revenue structure was optimized. According to the company's performance KuaiBao, the company's overall revenue in 2019 remained basically stable compared with the previous year; among them, IDC and cloud computing business revenue growth momentum is good, 2019H1 year-on-year growth of 18% led lighting electronics due to macroeconomic and local financial impact, business strategy contraction; financial electronics due to the periodic decline in banking market demand and overseas projects hit the ground than expected, revenue continues to decline. With the support of IDC and cloud computing business, the company's revenue for the whole year remains stable compared with 2018, and the revenue structure has been improved. IDC business has become the company's largest business, which is expected to continue to increase the company's comprehensive gross profit margin.
The improvement of revenue structure and the mitigation of non-recurrent losses have helped the company turn losses into profits. On the one hand, the growth of the company's performance is due to the improvement of the comprehensive gross profit margin driven by the improvement of the income structure. on the other hand, due to non-recurring profit and loss changes: the company made asset impairment provision of 226 million yuan in 2018 (including bad debt loss and inventory decline loss), reduced to 22 million yuan in 2019, and accumulated asset disposal income of 13.03 million yuan. Return net profit turned positive (2018 to-241 million). In terms of expenses, as of 2019Q3, the company's three expenses were under control, with a total of 189 million, down 11.3% from the same period last year; however, affected by the decline in revenue, the three expense rates increased to 23.34% year-on-year, and it is expected that the three expense rates will be reduced throughout the year as revenue stabilizes.
With the new Ping an Communications order, IDC/ cloud computing continues to be put into production and grows steadily. Since 2018, the company has successively signed a large IDC contract with Ping an Communication / Changsha Mobile with a total amount of 885 million + 2.6 billion / 711 million yuan; in July, the company has invested 316 million of its own funds in Changsha Yungu IDC to build an additional 2000 cabinets; in September, the company signed a "Smart Guangming" cloud storage equipment procurement project contract with Shenzhen Yuanrui City Intelligence, with a total price of 50 million yuan. On March 6, 2020, the company received another 920 million IDC order for Ping an Communications, which is expected to add 1500 cabinets to Shenzhen. In 2019, the company invested a lot of money into IDC construction. As of the third quarter, there was a cash outflow of 460 million yuan from investment activities and 690 million yuan from projects under construction, an increase of 87 percent over the same period at the beginning of the year. In the future, with the launch of the order project and the follow-up of the contract, the company's IDC/ cloud computing business is expected to grow steadily and is expected to contribute more than half of the company's revenue in 2022.
Risk factors: IDC cabinet expansion and shelving rate increase is not as expected; business transformation is not as expected.
Investment advice: the negative impact of the continued decline in the company's traditional business has not been eliminated. The company has lowered its EPS forecast of 2019, 2020, to 0.04, 0.25, 0.34 in 2021 (the original value is 0.07, 0.30, 0.44). The company's IDC construction and contract signing are excellent, IDC business is expected to achieve steady growth and profit improvement, and maintain a "buy" rating.
