Events:
According to the 2019 annual report and the first quarterly report in 2020, the company achieved operating income of 7.779 billion yuan in 2019, an increase of 6.51% over the same period last year, and realized a net profit of 322 million yuan, an increase of 6.26% over the same period last year, deducting 296 million yuan from non-net profit, a decrease of 1.47% over the same period last year.
In the first quarter of 2020, the company achieved operating income of 1.326 billion yuan, down 19.25% from the same period last year, and net profit of 64 million yuan, down 19% from the same period last year.
Event comments:
Industry information solutions business development is good, the launch of multi-cloud management and network security overall solution. The company's main business maintained steady growth in 2019, including industry information solutions business revenue of 5.75 billion yuan in 2019, an increase of 11.64% over the same period last year, and a gross profit margin of 14.04%, an increase of 0.15% over the same period last year. It is worth noting that according to the characteristics of cloud computing architecture, the company has launched a multi-cloud management solution. Customers can achieve multi-cloud resource scheduling, billing, automatic operation and maintenance, multi-tenant management, self-service operation, monitoring and alarm and other application requirements through a unified management platform. This solution lowers the operation and maintenance threshold for users to use the cloud platform, improves the efficiency of the use of cloud resources, and enhances the ability of cloud infrastructure to support customers' business. In addition, the company also provides overall network security solutions, covering five areas of network security, data security, terminal security, cloud security and security situational awareness, providing customers with one-stop solutions for in-depth defense.
The business of special service and continuous service grows steadily and releases customer value continuously.
In 2019, the operating income of the company's special service and continuous service business was 1.245 billion yuan, an increase of 4.61% over the same period last year, and the gross profit margin was 24.35%, a decrease of 0.87% over the same period last year. The company maintains a high renewal rate for the special and continuous services provided to its customers. At present, the company is actively upgrading the service platform to achieve the platform of continuous service management and the subscription of purchase, so as to enhance the user experience and release user value to a greater extent. We believe that the gross profit margin of the operation and maintenance and service-related business in the later stage of the project is higher, and the customer stickiness is strong, and the continuous improvement of the service platform is conducive to the improvement of the company's overall performance in the future.
The overall cost level of the company has increased, and the cash flow is abundant. In 2019, the company's sales expenses and management expenses increased by 8.79% and 14.52% respectively over last year, accounting for 4.83% and 2.46% of sales revenue, respectively. Due to the increase in sales rebates, the net cash flow generated by the company's operating activities in 2019 reached 858 million yuan, a substantial increase of 967.16% over the same period last year. In addition, the company's monetary capital at the end of 2019 was 2.02 billion yuan. We believe that abundant cash on hand will help the company to cope with the complex and changeable domestic and foreign environment in 2020 and steadily promote the development of its business.
Create two new businesses and promote the upgrading and transformation of the company. The company seizes the great opportunity of the industry information technology innovation market, takes the information technology innovation as the drive, takes the industry application as the traction, and focuses on creating complete information technology innovation solutions for finance and other industries. At the same time, the company deepened the industrial layout of the data center and invested in the construction of a "cloud base" data center in Songjiang, Shanghai in 2020, with cloud management services and data center operation services as its core business. 3024 racks are planned for the first phase of the data center, mainly serving financial cloud, government cloud and industry customer applications. The "Cloud Base" data center project has been included in the list of the first new Internet data center projects to support energy use in 2019. The company plans to turn industry-oriented information technology innovation solutions and data operation services into twin engines to promote the upgrading of the company's business.
Investment advice:
We estimate that the EPS of the company in 2020, 2021 and 2022 will be 0.841, 0.937 and 1.065 yuan, respectively, and the corresponding PCME will be 28.31,24.72 and 21.74 times, respectively.
At present, the latest price-to-earnings ratio (TTM, overall approach, excluding negative value) of the IT service industry is 49.23 times. While the company's traditional main business maintains steady growth, it actively creates two major new businesses, namely, information technology innovation solutions and data operation services. We believe that the company's current valuation has some room to rise, so it maintains its "overweight" rating.
Risk Tips:
Epidemic affects customer project schedule risk; market competition risk; technology research and development risk.