Overview of events
The company released its 19 annual report and 20Q1 quarterly report. Its revenue in 2019 was 1.24 billion yuan, an increase of 4.62% over the same period last year. The net profit returned to its mother turned into a profit of 21.97 million yuan. Excluding 18.86 million of non-recurrent income, the net profit after deducting non-recurrent profit was turned into a profit of 3.11 million yuan. 2020Q1's revenue was 305 million yuan, an increase of 21.81% over the same period last year, and its net profit was 24.37 million yuan, an increase of 106.49% over the same period last year. Excluding 13.18 million non-recurrent income, the net profit after deducting non-recurrent income was 11.19 million yuan, an increase of 54.89% over the same period last year.
In addition, the company announced that it plans to increase by no more than 1.2 billion yuan, of which 31%, 21%, 18%, and 30% will be used for industry smart cloud solution research and development, cornerstone research institute construction, sales and service system construction / supplementary working capital, respectively. the maximum number of shares in this issue is 330 million shares.
Analysis and judgment:
Generally speaking, the company still maintains the revenue growth trend after the expiration of the bet on the performance of mergers and acquisitions subsidiaries in 2018, and the integration effect of several M & A companies is more obvious. Revenue growth mainly comes from software cloud and game business: in terms of revenue, revenue from education services decreased by 18.41% to 634 million yuan compared with the same period last year, of which the revenue from examination paper marking and evaluation / school content and service / Tuo Wei school was 3.02 million yuan, respectively, and down 10%, 24%, 27%, respectively, compared with the same period last year. Our analysis is mainly due to the decline in traditional education business (such as early childhood education services, school messaging, etc.). New services such as test security and intelligent education platform are expected to contribute to the increase in the future. Revenue from mobile games increased 26% year-on-year to 232 million yuan, while revenue from software cloud services increased 67.09% to 374 million yuan. 2019Q4's revenue was 374 million yuan, down 1.60% from the same period last year, which was slower than that in the previous three quarters, but showed an obvious upward trend quarter by quarter. The net loss of homing in a single quarter decreased to-41 million compared with the same period last year, mainly due to a large impairment of goodwill in the same period last year.
Net profit contribution mainly comes from education and game business: in 2019, Haiyantian net profit was 57.77 million yuan, down 29% from the same period last year. Our analysis is mainly due to the company's increased investment in research and development after the end of the gambling period; the net profit of fire-soluble information is 35.21 million yuan, an increase of 12% over the same period last year, and the net profit is lower than the income growth rate. We analyze that the net profit is mainly due to the increase in promotion expenses after the release of the company from a third-party agent. The net profit of Tuowei education turned from loss to profit to 3.31 million yuan, and the net loss of long March education decreased to 7.22 million yuan.
Gross profit margin and expense rate decreased, and asset impairment decreased significantly: from the gross profit margin, the company's overall gross profit margin decreased by 2.89pct to 46.74% compared with the same period last year. Our analysis is mainly due to the increase in the proportion of software cloud business with low gross margin. Among them, the gross profit margin of education services / mobile games / software is 53.37%, 76.96% and 16.79% respectively, up 0.20%, 10.54% and 6.77%, respectively, compared with the same period last year. We analyze that the increase in gross profit margin of game business is mainly due to the conversion of third-party agents to companies, while the decrease of gross profit margin of software cloud business is due to the "integration of software and hardware", which covers the later operating income. The gross profit margin is lower than the pure software model. From the point of view of the expense rate, the sales / management / R & D / financial expense rate is 16.81%, 16.29%, 10.36%, 0.47%, respectively, which is lower than that of the same period last year. The larger decline in the management expense rate is mainly due to the reduction of personnel expenditure. From the perspective of asset impairment loss, the company provided 4.67 million yuan in 19 years and 1.4 billion yuan in 18 years, the impact of asset impairment loss on performance decreased significantly.
Revenue growth in the first quarter of 2020 benefited from software cloud contribution, while net profit growth benefited from non-recurring revenue contribution, in line with expectations. The company's revenue increased by 22% to 300 million yuan in the first quarter of 2020, mainly benefiting from the continued contribution of the software cloud, while the education information business was affected by the slow bidding affected by the epidemic and is expected to be delayed to the second half of the year. Net profit increased 106% to 24.37 million yuan, expected to benefit from the disposal of Tianjin Yinhe cool entertainment and cultural media equity confirmed investment income of nearly 10 million yuan, while deducted non-return mother net profit of 11.19 million yuan, an increase of 54.89% over the same period last year, in line with expectations. The growth rate of deducting non-net profit is higher than that of revenue, mainly due to the fact that the sales / management / R & D / financial expense rate has decreased to 13.57%, 11.47%, 9.92% and 0.07%, respectively, when the gross profit margin has dropped 8.58pct to 45.07%.
The company will raise no more than 1.2 billion yuan: (1) 31% will be used for the research and development of industry smart cloud solutions, with a total investment of 692 million yuan and a planned fund-raising of 372 million yuan. It will focus on R & D and promotion of "Smart Education Cloud solution", "Industrial Internet Cloud platform solution" and "Tuowei 5G+AI Smart Park Cloud solution". The project construction period is about 36 months, and the after-tax internal rate of return is 21.16%. (2) 21% will be used for the construction of the cornerstone research institute, with a total investment of 327 million yuan and a planned fund-raising of 252 million yuan, which will increase the investment in software and hardware of the cornerstone research institute and introduce R & D talents. the construction period of the project is about 36 months and does not produce direct economic benefits. (3) 18% of the project will be used for the construction of the sales and service system, with a total investment of 289 million yuan and a planned fund-raising of 216 million yuan. The existing system will be comprehensively and systematically upgraded and will match Huawei's sales system. The project construction period is about 36 months. It does not produce direct benefits; (4) 30% is used to supplement working capital and optimize the capital structure. The shares are capped at 330 million shares, which could dilute the apparent EPS by about 3 per cent compared with pre-issue.
Investment suggestion
Maintaining the profit forecast of 20x21, the company's EPS in 20-21-22 is expected to be 0.090.12x0.16 yuan. The future highlights are: (1) due to the increasing demand for the construction of online education platform during the epidemic, the number of users of the company's regional teaching center has doubled to 6 million; (2) Kunpeng server 20Q2 is expected to be put into production and is expected to produce about 60,000 units for the whole year. With the cooperation between the company and Huawei in the field of intelligent education, it can promote the promotion of Kunpeng all-in-one computer and other industry solutions; (3) the gross profit margin of companies such as the industrial Internet and Smart City is 40-60%. There is still room to improve the gross profit margin of the software cloud business and maintain the "overweight" rating.
Risk hint
Haiyantian business expansion is not as expected, the retention rate after the epidemic is lower than the expected risk, systemic risk.