Main points of investment:
Event: on August 27, 2020, the company released its results for the first half of 2020. In the first half of the year, the company achieved revenue of 2.851 billion yuan, YoY-7.27%; net profit of 325 million yuan and YoY of 517.03%; deducting non-return net profit to reverse losses compared with the same period last year.
The performance of H1 exceeded expectations, and the profit side took the lead in stabilizing. 20Q1-Q2 's net profit increased for the first time in 18 years and reversed its losses at the same time. Of this total, the non-recurrent profit and loss in the first half of the year was 305 million yuan, of which the profit and loss on the disposal of non-current assets was about 313 million yuan (the partial delivery of H1 stock IDC assets was completed, and it is expected that the transfer of IDC assets will contribute about 950 million yuan to the net profit for the whole year of 2020). Q2 revenue growth in a single quarter became a regular employee for the first time in three years. IDC business is relatively sound, Internet access business decline narrowed, the operating situation tends to be stable. In terms of subsidiaries, Beijing Telecom contributed 185 million yuan in profits in the first half of the year, while Great Wall Broadband still lost money to varying degrees. With the promotion of the company's transformation strategy, there is still room for improvement in operating profits in the future.
Financial perspective: the bottom performance is solid and the risk is initially cleared. (1) balance sheet: at the end of Q2, fixed assets accounted for less than 30% of total assets, goodwill was less than 100 million yuan, and non-current liabilities due within one year dropped to 1.05 billion from 4.926 billion at the end of 1919. (2) in terms of cash flow statement, the cash inflows of Q1-Q2 sales and labor services are 8.39 yuan and 1.402 billion yuan respectively, and the net operating cash flow is 2.78 yuan and 112 million yuan respectively, which is compatible with the income statement. (3) in terms of income statement, H1 deducts 21 million yuan of non-return net profit to reverse losses compared with the same period last year, and the financial situation is solid. At the same time, during the reporting period, the company completed the resale, interest payment and resale of 17 and 18 Pengbo bonds, and the US dollar debt was successfully extended, and the interest expense led to a temporary increase in financial expenses.
Business perspective: the transformation direction is clear, focusing on customer resources and long-term operation. (1) actively adjust the Internet access business, taking the cooperation between Beijing and Unicom to establish brands such as "Wo Changkuan" as an example, which has been promoted in Shanghai and other regions; (2) the IDC business has transformed from heavy assets to a diversified operation mode of self-construction + cooperation + entrusted operation, while developing customization for major customers, of which about 100 million yuan will be shared annually after the purchase of the underlying assets of about 30,000 cabinets. The company's positive pattern changes and historical burden, broadband services and stock IDC projects constitute the "bottom of performance".
20 years of experience, IDC and cloud space can be expected. In 2019, Jiatu jointly invested 1.5 billion yuan to build a Nanjing data center with a capacity of 8400 cabinets, which is the first case under the HOMM model. In May 2020, it cooperated with Jinquanyuan to build a cloud computing data center in Langfang, with a total capacity of 12000 high-density cabinets, reaching production in two batches of 2021-2022 respectively. In addition, the company has sufficient projects and energy reserves in Shenzhen, Kunshan and other places, and it is expected that the number of new construction / operation cabinets will be increased to 30000, and the number of operational cabinets will increase to 120000 in 2023. In addition, businesses such as Smart Cloud Network will also contribute new increments.
Maintain earnings forecasts and buy ratings. The company actively adjusts broadband and IDC services, with abundant resource reserves in the future, and the HOMM model reflects the company's strong customer resources and operating capacity; it does not consider the non-operating profits brought by the revitalization of IDC underlying assets for the time being. It is estimated that the return net profit of the company from 2020 to 2022 is 3.79,5.06 and 681 million yuan respectively, of which the loss will be reversed in 2020, and the corresponding PE in three years will be 35x, 26x and 19x. Maintain the buy rating.
Risk hints: the adjustment progress of broadband access services is affected by external factors; third-party cooperation in IDC may be uncertain.
