The company released its 2020 mid-year report, achieving revenue of 93 million yuan (-4.8%) and net profit of 65.59 million yuan (-58.0%). Q2 Revenue and deductions increased well year-on-year in a single quarter, with breakthroughs in segments such as sorting and trendy play. Overseas and other heavily affected businesses are expected to return to the right track in the second half of the year and maintain buying ratings.
Key points to support ratings
The performance was in line with expectations, and the decline contracted rapidly, with no increase of 40% in a single quarter. Q2 revenue was 540 million (+21%), which was basically the same in the first half of the year; net profit was 50.51 million (-41%), a sharp reduction from the -79% decline in the first quarter, while excluding 47.39 million (+39%), achieved significant growth (non-recurring factors mainly included Valin Electronics' equity income of 49.34 million last year). The overall results are in line with forecasts.
Logistics broke through sorting systems, and retail broke through the trend. The company's top three tracks are still remarkable even under the pandemic. (1) The logistics intelligent sorting system completed a two-year cultivation period and began large-scale expansion. It won bids for procurement projects such as Post and SF Express, and placed orders and contract amounts increased dramatically year-on-year, driven by express delivery demand; although courier terminals declined similarly, they began to stabilize under the impetus of the company. (2) The new retail sector targets smart microelectronics to increase innovation and discovery to achieve mass sales in the Chaowan market; “City Partners” plans to promote as scheduled to fill the long-tail market, and the number of new cooperative terminals and software users grew rapidly in 20H1. (3) The financial sector maintained high growth under the opportunity of localization, which led to a 54% increase in service revenue.
Other new business formats, including smart food pickers, medicine dispensers, and charging cabinets, have completed sample pilot sales.
The negative impact of foreign markets has been contained. The company's foreign revenue (mainly traditional business) accounted for about 1/4. Affected by factors such as the epidemic, traditional printing modules declined year-on-year, but the decline in the first half of the year was only 14%, and the scope of the company's drag was effectively controlled. The company expects export sales to stop falling and pick up in Q3, which also means that the same decline throughout the year may be further optimized.
valuations
Net profit from 2020 to 2022 is expected to be 370 million, 490 million, and 660 million yuan, EPS is 0.55 yuan, 0.74 yuan, and 0.92 yuan (fine adjustment of about -3 to -7%), and corresponding PE is 19X, 15X, and 12X. The company's early business highlights have been implemented one after another, and the valuation has a “double click” basis to maintain the purchase rating.
The main risks faced by ratings
The development of major customers fell short of expectations; overseas influence continued.
