Core viewpoints
In 2019, the company realized operating income / net return profit / deduction of non-return net profit / net cash flow of operating activities of 13.40 billion yuan, up 108.44%, 88.46% and 337.71% over the same period last year, which is basically consistent with the performance disclosed by KuaiBao. The company's income structure has been continuously optimized, gross profit margin has increased significantly, and business transformation has achieved results. It is optimistic about the growth of IDC and cloud business, the increase of gross profit margin and the improvement of expense rate under the company's continuous R & D investment. Maintain a "buy" rating.
The income structure has been optimized, and the gross profit margin has been greatly improved as a whole. Benefiting from the promotion of Changsha Yungu / Shenzhen Guangming / Dongguan Qifeng IDC project, the increase in the shelving rate of cabinets that have been put into production and the sales of value-added services, the company's IDC and cloud computing revenue is 477 million yuan (+ 37.07%) and gross profit margin is 32.01% (+ 7.40 PCTs), accounting for 35.61% (+ 9.49 PCTs). Benefiting from the quality and cost control of self-service terminals, focusing on high-quality customers and real estate / government / transportation industries, a wide range of secure payment applications, mobile payment / face recognition / tax control applications and strengthening certification at home and abroad, the company's financial electronic income is 398 million yuan (- 2.87%), gross profit margin 29.87% (+ 10.89 PCTs), accounting for 29.72% (- 1.04 PCTs). As the company strengthens business screening / risk control, improves the payback mechanism and adjusts the personnel structure, the company's lighting electronic income is 217 million yuan (- 22.60%), with a gross profit margin of 27.42% (+ 3.94 PCTs), accounting for 16.20% (- 4.85 PCTs). Overall, the company saw a slight increase in revenue in 2019, with a big increase in gross profit margin of 8.38 PCTs.
Profitability rebounded, expense rates have improved and there is still room for decline. Benefiting from fine internal management (reducing costs and increasing efficiency, optimizing production processes and strengthening the construction of management system) and external differentiation regulation (focusing on expanding projects with good cash flow and customers with good performance), the company reduced various expenses on the basis of a slight increase in revenue in 2019. The annual sales / management / financial expense rate is 7.82% 6.35% 5.50% (year-on-year-1.31% 0.90 PCTs), in which the sales expense rate has reached a historical low, but there is still much room for improvement. The 2019Q4 sales / management / financial expense rate is 6.13%, 4.72%, 3.19%, the lowest for the year. The sharp increase in gross profit margin combined with the across-the-board improvement in expense rates, the company's operating profit margin rebounded sharply to 1.24% in 2019 (there was a large asset impairment in + 21.73 PCTs,2018), but there is still a big gap and room for improvement compared with the level of around 7% in 2012-2015.
Research and development investment continues to build a moat to consolidate the foundation for long-term development. In 2019, the company continued to increase technology and product research and development, with R & D investment of 110 million yuan (+ 31.03%), accounting for 8.20% of revenue (+ 1.91 PCTs) and 27.60% of R & D personnel (+ 8.47 PCTs). In the field of self-service business, the company strives to build the integrated capability of "standardized hardware + platform software + service operation and maintenance", and actively layout the Smart Internet market based on 5G/ face speech recognition / cloud computing technology. In the field of secure payment, the company strives to create a comprehensive solution of "cloud + network + end + industry application", and develops and upgrades the intelligent POS/ cloud horn Internet of things platform and related products such as equipment / tanker encryption keyboard / face payment device / tax control device. In the field of IDC and cloud computing, the company strives to strengthen the independent research and development capability of "IDC+ Ecology" (IDC/ cloud computing / smart city / smart park, etc.) and accumulate massive data distributed storage / data center energy saving / cloud computing operation and maintenance management platform / cloud computing virtualization and other key technologies. Technological innovation and product research and development in these areas lay a solid foundation for the company's long-term development.
Risk factors: IDC cabinet expansion and shelving rate increase is lower than expected; financial electronics / lighting electronics business decline is higher than expected; business transformation progress is lower than expected; cost control is not as expected.
Investment suggestion: be optimistic about the growth of IDC/ cloud business, the increase of gross profit margin and the improvement of expense rate under the company's continuous R & D investment, maintain the 2020 EPS forecast of 0.25max 0.34 yuan in 2021, add the EPS forecast of 0.45 yuan in 2022, and maintain the "buy" rating.
