Company announcement: 2020H1 achieved revenue of 29.656 billion yuan/ +28.37%, net profit of the return mother of 73 million yuan/ +475.42%, deducting net profit of -113 million yuan/ -866.01%. The difference between the two stemmed from the investment income of about 170 million yuan brought about by the company's sale of 95% shares of Changjiang Industrial and Zhanggong Liquor. Among them, 20Q2's single-quarter revenue was 15.278 billion yuan/ +18.45%, net profit of 3.33 million yuan/ +189.03%, net profit of non-return mother net profit of -5.53 million yuan/ -758.19%.
Q2 The slowdown in the growth rate of mobile phone distribution is speculated to be due to changes in the base. The company's Q1 revenue grew as high as 40.91% year on year and slowed to 18.45% in Q2, but maintained a positive 6.26% month-on-month growth rate. Considering that more than 90% of the company's revenue comes from the mobile phone distribution business, and in June '19, the company began to take over the original Apple sales of Peking University on the JD self-operated platform, so 19Q1 actually had a low base, making 20Q1 grow faster than 20Q2. In fact, according to the IDC tracking report, the year-on-year growth rate of China's smartphone market shipments in 20Q1/20Q2 was -20.3%/-10.3% respectively, and the company's 20H1 mobile phone distribution revenue growth rate reached 19.46%, which is far higher than the industry average growth rate. It is worth mentioning that as an important partner of Huawei phones, the company actively expanded Huawei's overseas sales channels in the first half of the year. The overseas sales scale has reached 4 times that of the full year of 2019. Currently, it has cooperated with 43 customers in 22 countries including the UAE and Nigeria.
The lottery business has clearly declined, but I am optimistic about the subsequent rebound. Affected by the public health incident, the 20H1 domestic offline lottery site business basically stagnated, leaving the company's lottery business revenue to only 48 million yuan/ -44.73%. However, 20H1 won the bid for the Beijing Fucai sales terminal (special equipment) purchase project for the first time, successfully won the first and second batch of national video lottery VLT terminal projects, explored a new marketing model combining online and offline in Chongqing, and also collaborated with Huobi China to research blockchain lotteries, successfully expanding the lottery business landscape. It is optimistic that the company's lottery business will rebound after the industry recovers.
The retail e-commerce business is growing steadily. Mainly Nengliang e-commerce, 20H1 retail e-commerce has revenue of 2,288 billion yuan. 23 new stores have been opened on Tmall, JD, and Pinduoduo, 45 new cooperative brands have been added, and five new divisions, including home textiles, mother and baby, have also been added. The scale of the non-mobile phone business has grown significantly. The retail e-commerce business is expected to become a new profit growth point for the company.
Cost reduction and efficiency continued to advance, and interest rates dropped significantly during the period. The 20H1 sales rate was 1.56% the same as the previous year, the management & R&D fee rate of 0.72% /-0.08pct stemmed from expenses other than employee remuneration dropped significantly, and the financial rate of 0.56%/-0.34 pct stemmed from a sharp reduction in bill discount interest while interest expenses remained flat. The company continues to promote cost reduction and efficiency.
Profit Forecast and Investment Rating: Mobile phone distribution business expands JD channel & sales subsidiaries to bring investment income to help 20H1's net profit increase dramatically. Looking forward to the future, the “1+N” strategic layout of the company will gradually become clear. The wave of 5G switching and the expansion of the JD platform will drive the continued rapid growth of the mobile phone distribution business, and the “going global” strategy will open up space for the development of the lottery business. In addition, the company's tower reading literature has introduced fighting by ByteDance, and the mobile phone distribution business expands duty-free channels on the outlying islands. It is recommended that active attention be paid. The profit forecast was slightly adjusted. The EPS for 20-22 is expected to be 0.17/0.20/0.33 yuan respectively, and the stock price on August 21 corresponds to 45/39/23 times PE, respectively, maintaining the “prudent increase in holdings” rating.
Risk warning: overseas demand falls short of expectations, exchange rate risks, business development falls short of expectations, etc.