Main points of investment
Event: on August 21, 263 disclosed the reported results that H1 realized 489 million yuan in operating income in 2020, down 4.19% from the same period last year, and achieved a net profit of 132 million yuan, an increase of 105.56% over the same period last year.
Operating income decreased slightly, and long-term revenue capacity was not affected: affected by the epidemic, some orders were delayed to pick up goods and orders for the current period decreased. The company's Q2 operating income declined in 2020, with a net profit of 96 million yuan, an increase of 252.04% over the same period last year and an increase of 170.27% compared with Q1 (36 million yuan). Excluding non-recurring change gains and losses (fair value change gains and losses) increased by 56.55% year-on-year, an increase of 15.01% month-on-month. Online education, telecommuting, video collaboration and other affected by the epidemic demand increased, the company's corresponding business growth, its long-term profitability continues to enhance, profitability is rising steadily. We believe that under the guidance of the "video +" strategy, the 263rd enterprise communications business will gradually pick up as the company continues to explore the integration of new products and various application scenarios and form different solutions in various industries.
Expenses and cash flow relief, revenue capacity as a whole: in 2020, Q2 company 2B business gross margin increased, sales gross profit margin 56.11%, higher than Q1 (55.34%) 0.77pp, sales net profit rate 40.21%, higher 25.52pp than Q1 (14.69%). In 2020, Q2 incurred sales expenses of 33 million yuan, down 24.57% from the same period last year; company management expenses (including R & D expenses of 23 million yuan) were 51 million yuan, down 25.26% from the same period last year, with reasonable changes in expenses; and the company's financial expenses were-690000 yuan, resulting in a decrease of 83.21% year-on-year interest income. The net cash flow generated by the operating activities of H1 company in 2020 was 93 million yuan. In the first half of the year, the increase in cash flow brought about by the development of business meetings and live broadcasts, and the reduction of social security, rent and advertising expenses during the epidemic. An increase of 61.65% over the same period last year (117.24%) compared with the same period last year (99.42%). The overall ratio of sales cash to income remains at 100%, the ability to recover money is good, and the overall trend of operating cash flow is good.
The "video +" strategy leads the overall entry into the cloud video conference main track: in the video conference business of the company's cloud video business, the company puts forward the "video +" strategy and begins to enter the cloud video conference main track in an all-round way. Through the model of "cloud + end + industry", video technology is deeply integrated with the inside and outside of the enterprise to empower the upstream and downstream ecological chain of the industry and the enterprise. Video conference can solve the problem of north-south interconnection between domestic multi-operators, ensure the quality of high-definition and smooth video communication, video conference has comprehensive compatibility, it can be interconnected with mainstream video conference terminals in the market and has multiple advantages such as stability, high definition and easy to use, so it has become a necessary enabling tool for modern enterprises facing the Internet.
Profit forecast and investment rating: we expect operating income of 1.172 billion yuan, 1.42 billion yuan and 1.786 billion yuan respectively from 2020 to 2022, net profit of 218 million yuan, 279 million yuan and 365 million yuan respectively, and EPS of 0.16,0.20,0.27 yuan, respectively. The current share price corresponds to 44Unix 35Unix, maintaining the "buy" rating.
Risk tips: the easing of Sino-US trade frictions is lower than expected, the progress of video technology research and development is not as expected, and the risk of core customer loss.