Revenue has increased dramatically, and impairment charges have had a certain impact on profits. The company released its 2019 annual report and 2020 quarterly report. It achieved revenue of 1,565 million yuan for the whole year, a sharp increase of 51.62% over the previous year. As accounts receivable and inventory accrued impairment preparations of 54.06 million yuan, the net profit of the mother was 123 million yuan, a decrease of 8.88% over the previous year. Q1 of 2020 achieved revenue of 270 million yuan, an increase of 51.84% over the previous year, and the net profit of the mother was 19.9 million yuan. The profit distribution plan is to pay 1.02 yuan (tax included) for every 10 shares.
Expense control is generally reasonable. 1) In terms of cost, gross margin decreased by 9.64 pct compared to the same period last year. 2) In terms of expenses, sales expenses increased 47.58% year on year, management expenses increased 28.18% year on year, and R&D expenses increased 11.59% year on year. 3) In terms of cash flow, net operating cash flow was -45.6 million yuan.
There are plenty of in-hand orders. During the reporting period, the company proposed the overall development and promotion model of “two clouds, two centers, and one base” in order to accelerate the rapid development and implementation of new businesses in the four major business sectors and integrate existing products and services, namely: integrated emergency command center, urban safety operation monitoring center, fire safety cloud, industrial safety cloud, and safety education base. By the end of 2019, the company had executed contracts totaling 2,856 billion yuan, of which the overseas business had executed contracts of 1,440 billion yuan and the domestic business had executed contracts of 1,456 billion yuan. The current order situation was quite abundant. Among the four major business segments: 1) Public safety and emergency services continued to develop rapidly, with revenue increasing 47.52% year on year; 2) Urban safety business has landed in more cities and signed several new urban lifeline projects such as Foshan, Xuzhou, and Huaibei, with revenue up 14.41% year on year; 3) In terms of overseas public safety business, the gradual implementation and delivery of projects such as the Angolan Public Safety Integration Platform and the customs management system of an African country has boosted overseas business revenue growth by 42.68%. New projects have been signed in Singapore, Latin America, Indonesia, the Philippines, Laos, etc. Inject new impetus; 4) In the fire safety business sector, through innovation in products, technology and services, the company's service capacity throughout the fire protection industry chain was rapidly enhanced, and revenue increased sharply by 270.97% over the same period last year.
Q1 performance was affected by the pandemic and had a relatively limited guiding effect for the whole year. Affected by the COVID-19 pandemic, there was a decrease in new orders in Q1 2020, while related costs and expenses increased compared to the same period last year, leading to a decline in net profit for the current period. Moreover, due to the influence of customer structure, contract types, and business seasonality, the company's profit distribution in recent years has generally been characterized by unbalanced quarterly, low and then high, so it is expected that Q1 profit will have a relatively limited guiding effect on this year's full-year performance.
Investment advice: EPS is expected to be 0.79 yuan and 1.18 yuan respectively from 2020 to 2021, maintaining the “buy-A” rating.
Risk warning: New projects and repayment progress are lower than expected; risk in overseas markets
