Events:

The company released the mid-2020 report that the operating income in the first half of the year was 1.298 billion yuan, down 11.66% from the same period last year, and the net profit was 270 million yuan, down 2.49% from the same period last year. 104 million yuan was deducted from non-net profit, an increase of 12.99% over the same period last year.

Our comments are as follows:

The impact of the epidemic was basically eliminated, with non-net profits deducted 91.82 million yuan in the second quarter, a new high in a single quarter.

The traditional business has been spun off, focusing on emerging business models such as 2B MCN, and operating cash flow has become positive substantially.

The company's traditional textile printing and dyeing, seamless steel pipe and other businesses were greatly affected by the epidemic, and the performance of relevant subsidiaries decreased significantly compared with the same period last year. The company plans to divest assets related to traditional business, comprehensively focus on 2B MCN and other emerging businesses, focus on developing industry-leading customers, reduce the risk of accounts receivable, substantially positive operating cash flow, achieve positive growth in overall non-net profits of listed companies in the first half of the year, achieve remarkable results in business transformation, and basically eliminate the impact of the epidemic.

Wholly-owned subsidiary Tai Yi Shang 2B MCN cooperated with the brand, Douyin, Kuaishou Technology, Taobao Live and other platforms, and the 2B MCN business model entered the accelerated landing phase. Brand side-operator traffic card-live platform industry chain through.

Taiyi refers to the network-wide cooperation with colorful Olai (Zhejiang), Niu Meng in Hangzhou, Hualitang clothing in Suzhou to reach Douyin, Kuaishou Technology, Taobao Live and so on. Among them, colorful Ole was authorized by Ningbo Romon to sell clothing under the "Romon" and "ROMON" brand, Niu Meng Media obtained the exclusive license of "Muji" on the Internet and e-commerce channels, and Hualitang was authorized to operate the clothing category live broadcast generation of the "Daphne" brand. Sun's rich digital chain and China Unicom have jointly developed a 5G card package for community users, which is stream-free to all Tencent APP, Jinri Toutiao, Douyin and other applications nationwide. Taiyi refers to the fact that it will also increase its capital to own 85% of Kasai Technology. Kasai Technology has signed cooperation agreements with China Union, China Mobile Limited sales Branch and China Telecom Corporation Electronic Channel Operation Center in Douyin, Kuaishou Technology, Jinri Toutiao, Private Domain, RCS and other network-wide channels to carry out card number business and 5G upgrade membership package business.

Investment advice and profit Forecast

In the future, the company focuses on core technology platforms such as 5G, big data and blockchain, with emphasis on promoting 2B MCN new business, deep cooperation with industry head customers, online precision marketing, and building business barriers around digital identity, which is expected to solve bottlenecks such as excessive bargaining power and personnel mobility of head network celebrities, as well as limited credibility of waist network celebrities and lack of carrying capacity. The company's 2B MCN business has been continuously recognized by the brand, and the accelerated landing of the brand-operator 5G card-live broadcast platform industry chain is expected to promote the company's long-term and rapid growth. It is estimated that the company's operating net profit from 2020 to 2022 (excluding fair value changes and investment income from holding Shangfeng cement shares) is 3.04,4.53 and 653 million yuan respectively, corresponding to 23 times price-to-earnings ratio in 20 years and 15 times earnings in 21 years, reiterating the "buy" rating.

Risk hint: the landing progress of new business is slower than expected, industry competition is higher than expected, and the progress of traditional business divestiture is slower than expected.