Event: the company released its annual report in 2019, with revenue of 298 million yuan during the reporting period, an increase of 47.71% over the same period last year, and a net profit of 34 million yuan, an increase of 330.28% over the same period last year. The company plans to pay a cash dividend of 0.5 yuan (including tax) to all shareholders for every 10 shares. At the same time, the company released its quarterly report for 2020, with revenue of 73 million yuan during the reporting period, an increase of 21.75% over the same period last year, and a net profit of 16 million yuan, up 51.96% over the same period last year.
Vertical deepening + horizontal expansion, performance inflection point: during the reporting period, the revenue of the company's main business integration media operation platform was 187 million yuan, an increase of 42.79% over the same period last year. At the same time, the new products, AI video big data platform and ultra high definition video platform, achieved revenue of 7.5752 million yuan and 74.763 million yuan respectively. In recent years, the company has focused on the layout of large video business. On the one hand, relying on the development wave of 5G and UHD industry, the company has continuously deepened its product upgrading in the field of operators, and signed a two-year customized development contract with major customers in this field in 2019 with an amount of more than 200 million yuan. In addition, the company actively promotes the horizontal expansion of product technology, adding important customers such as State Grid and Huawei, while realizing the full blossom of related business in finance, government affairs, health care and other fields. On this basis, the company's gross profit margin has continued to rise since 2018, from 41.69% at that time to 53.21% in the first quarter of 2020, with revenue growth of more than 20% in the first quarter.
With the launch of the product strategy, profitability is expected to continue to improve: since 2016, the company has continued to promote the nationalization strategy and carried out forward-looking R & D layout in areas such as UHD, AI and VR, with the total number of employees growing rapidly from 763 in 2016 to 1378 in 2019, resulting in a continuous increase in the corresponding expense rate and a decline in net interest rates. With the continuous landing of the nationalization strategy and related products, the proportion of the company's three major expenses decreased significantly in 2019, of which the sales expense rate dropped to 4.63% from 7.30% in 2018, and the management expense rate decreased from 15.07% to 11.31%. The rate of R & D expenses decreased from 23.91% to 19.77%. At the same time of the rapid growth in revenue, the significant reduction in the expense rate led to a significant increase in the company's net interest rate, from 3.96% in 2018 to 11.54% in 2019. Driven by the 5G and UHD industries, the results invested by the company in the past few years are beginning to show, and profitability is expected to continue to recover.
Industry advantages, supplemented by technological advantages, drive the company's long-term development capabilities: with the arrival of 5G and UHD, the traffic of the video platform will show explosive growth, so a huge IT budget will be invested in the operation and management platform, the underlying architecture and content production and distribution service modules.
As a core participant in the construction of video platforms for operators and some IT giants, the company is expected to take advantage of this opportunity to achieve great-leap-forward development of business. From the company's own point of view, its core technology focuses on video management, codec, video AI, VR and other areas, and has the 2018 World Cup platform operation and leading companies to undertake important video projects experience. Industry advantages, supplemented by their own technological advantages, will become the two major driving forces for the company's long-term development.
Investment suggestion: as the leading Internet video solution provider in China, as the country vigorously develops the ultra-high definition video industry and operators take advantage of 5G opportunities to comprehensively upgrade video and other content side, its business will usher in a new round of development peak. The company takes the operator as the starting point, actively expand other application areas, and the "video + AI" strategy is expected to become the driving force for its long-term development.
The company's EPS is expected to be 0.38 yuan and 0.75 yuan in 2020 and 2021, with a buy-A rating and a 6-month target price of 30 yuan.
Risk hints: (1) the diversified market development does not meet expectations, and (2) the market competition of operators aggravates the risk.