Main points of investment:
Landscape ecology + cultural communication to build the company's core business. The company's traditional main business is landscape engineering construction, landscape planning and design, greening maintenance and seedling production and marketing. In 2015, 2016 and 2017, it acquired 90% equity of Shanghai Hengrun Digital Technology Group Co., Ltd., Demaji International Exhibition Co., Ltd., and Micro Communication (Beijing) Network Technology Co., Ltd. 21.86% equity, continue to increase the layout of the field of cultural tourism. At present, the company has formed a core business structure of "landscape ecology + water operation + cultural tourism", with a contribution proportion of operating profit of 3:4:3.
There are many bright spots in the culture and travel plate. The company's cultural tourism sector involves a number of prosperity-oriented sub-fields, including VR/AR equipment and applications, brand culture and exhibition, MCN marketing and other sub-divisions.
"ToB" VR equipment leader Hengrun Technology plans to split and appear on the market, which is expected to usher in value reshaping.
Hengrun Technology is the domestic literature and travel main project high-end equipment and system integration service provider, focusing on VR as the representative of the immersive amusement equipment system research and development, design, production and integration, the business model is mainly "ToB". 5G accelerates the application of VR, and Hengrun Technology will continue to benefit from the investment and development of immersive experiential amusement equipment. WIMI (WiMi Hologram Cloud Inc) has risen sharply recently, and the VR/AR industry is expected to usher in a new round of catalysis. In the long run, the company plans to spin off Hengrun Technology to be listed on the growth Enterprise Market, with a total operating income and net profit of 1.809 billion yuan and 330 million yuan respectively from 2017 to 2019. With reference to the valuation of some of the strong VR50 companies in 2019, Hengrun Technology will be able to fully enjoy the dividend of market growth in the industry on the one hand and reshape its value on the other.
Demaji online booth to create a new model. Demaji is committed to global brand creative marketing, providing global customers with integrated and professional display services and solutions. Under the influence of COVID-19, in the face of offline exhibition obstacles and urgent need to break the online exhibition, Demaji actively explore and rapidly develop online VR showroom products, the future cooperation between online exhibition products and manufacturers, and even Internet leading companies is worth looking forward to.
The MCN platform is becoming more and more mature. The company's 21.86% stake in Micro Communications focuses on providing social network and new media integrated marketing service solutions, which can provide MCN marketing "content, channel, platform" industry-wide chain services. A new development strategy has been established since 2019, that is, within 3-5 years, we will mainly focus on short video and live content marketing, gradually strengthen the investment in independent online celebrity content e-commerce marketing business, and have strong content operation and whole-case capabilities. With the help of the development of MCN industry, it is expected to achieve sustained growth of e-commerce C-end income.
The traditional business development path is clear and provides the cornerstone of performance. The company's traditional business is mainly ecological garden engineering, water-based, operating income accounts for a relatively large, to provide performance basis and support. According to the statistics disclosed by the company announcement, from the beginning of 2020 to the present, the company has won the bid for 8 landscape engineering and water environment control projects, with a total investment of 4.922 billion yuan, accounting for 71.11% of the income of the corresponding sectors in 2019. In the field of landscape engineering, the company improves the comprehensive quality of engineering business through strict project evaluation and screening, implementation of project process management, and setting up payback mechanism and other management measures. In the field of water affairs and water environment treatment, we should seize the historical opportunity of increasing demand for water environment treatment and expand orders in line with the trend. The company plans to raise 1.22 billion yuan in non-public offerings, which is expected to effectively ensure the smooth progress of the project on hand after the completion of the offering, and the performance is expected to recover gradually from the second half of the year.
Cover for the first time, give the company "increase" rating: the company's "ecological garden + cultural tourism" twin-engine layout is gradually mature, the landscape remains stable, the water environment management business is strengthened, and the performance is expected to recover gradually from the second half of the year. There are many bright spots in cultural tourism, such as VR/AR, MCN, online exhibition and other sub-sectors. Hengrun Technology's proposed split to gem is expected to usher in value reshaping. We are optimistic about the investment logic of the company's traditional business support + cultural travel business flexibility, and do not consider the impact of non-public offering shares on the company's performance for the time being. it is predicted that the EPS from 2020 to 2022 will be 0.20,0.25,0.31 yuan per share respectively. Corresponding to the current share price PE is 24.57,19.89 and 16.11 times, covering for the first time, giving the company an "overweight" rating.
Risk hints: the risk of order acquisition is not up to expectation; the risk of Hengrun Technology spin-off and listing failure; the risk of accounts receivable; the risk that the epidemic continues to affect project construction, exhibition and other risks; the non-public offering schedule is not up to the expected risk.
