Event: the company released the 2019 annual report: during the reporting period, the revenue decreased by 2.4% with 1.26 billion yuan, and the net profit belonging to shareholders of listed companies increased by 11.5% with 130 million yuan. The net profit of 130 million yuan after deducting non-recurring profits and losses belonging to shareholders of listed companies increased by 10.2%, and the net cash flow generated by operating activities increased by 4.6%.

Income structure optimization, deducting the impact of equity incentive costs, a year-on-year increase

In 2019, the company increased the equity incentive fee by 43.11 million yuan, and after deducting this part of the influence, the net profit belonging to the shareholders of the listed company was 170 million yuan and increased by 48.3%. According to the incentive plan, it is estimated that the incentive fee will be about 50 million yuan in 2020. According to the business segment, the revenue of the software development business with a gross profit margin of 47.7% was 460 million yuan and increased by 1.5%, the operating service business with a gross profit margin of 27.5% was 650 million yuan with an increase of 16.5%, and the income from the system integration business with a gross profit margin of 12% was 150 million yuan with a decrease of 46.3%. The proportion of business income with higher gross profit margin increased, making the company's comprehensive gross profit margin increased by 4.2pcts compared with the same period in 2018. With the pilot promotion of the urban integrated management service platform, the increase in gross profit margin is expected to continue. After deducting the influence of the new equity incentive fees, the expense rate remained stable during the period. Baoding Jindi's net profit after deducting non-recurring profits and losses in 2019 was 60.82 million yuan, lower than the promised performance of 70 million yuan.

The promotion of urban integrated management service platform brings new opportunities

As the chief editor of the Technical Standard of Urban Integrated Management Service platform (draft for soliciting opinions) issued by the Ministry of Housing and Construction, the company occupies 70% of the market share in the field of grid urban management. Under the background of "continue to deepen the reform of urban management law enforcement system and speed up the construction of urban integrated management service platform", the company has completed the product prototype development, along with the subsequent pilot promotion, it will bring new requirements for direct system upgrade and iteration, which will significantly benefit. At the same time, with the development of multi-network integration of the government's internal management system, the company's customers will be extended to government departments at all levels, such as big data Bureau and Comprehensive Law Enforcement Bureau, which will bring new incremental market opportunities.

Investment advice:

The net profits of shareholders belonging to listed companies from 2020 to 2021 are 1.85 yuan and 311 million yuan respectively, and are expected to be 367 million yuan in 2022, corresponding to 0.43,0.73,0.86 yuan per share in 2020-2022, respectively, maintaining the "buy" rating.

Risk tips: the market promotion is not up to expectations, the risk of goodwill impairment.