Core buying points: undervaluation+small but beautiful varieties with high growth, 21E 18XPE new infrastructure policy+COVID-19, driven by the COVID-19 pandemic, the company's orders are booming (20Q1/Q2 order volume +42%/110% compared to the previous year, and the annual growth rate is expected to reach 70%), combined with equity incentives, the management team gave full play to its competitive vitality (according to executive requirements, net profit in 2020-21 was not less than 28/3.7 billion yuan). We expect the company's performance to enter a rapid growth channel. In 202E, PE was only 18X, a small but beautiful variety with high undervaluation growth.
Unlike market views: the strategic transformation is beginning to bear fruit, and it is worth looking forward to the future when the company is clearly positioned as a “intelligent IoT overall solution” construction service provider. In recent years, the strategic transformation has seen results: At the technical level: In 2020, the company's software capabilities obtained the world's most difficult CMMI5 certification, building core technology systems such as the AIoT intelligent IoT management and control platform and edge controller/C3 smart terminal system; 2) Business level: the operating business continues to land, and the company's operating revenue has reached 10 million in 2019, and is expected to maintain a relatively rapid growth trend in the future. In addition, recently won contracts such as the Qianhai Guiwan Park Intelligent Project, which shows the clear trend of softwareization of the company's products.
Project type marches into product type, and valuation is expected to increase
The company's image to the market in the past few years has been basically project-driven, and valuations have been suppressed in recent years after the period of high project growth has passed. At this stage, with the company's transformation into an integrated solution provider for the intelligent IoT, more emphasis is placed on commercialization capabilities and operational capabilities. We believe that the company's valuation is also expected to return to the industry average.
Investment advice
We expect the company's revenue to be 3.21 billion, 4.39 billion and 6.0.2 billion respectively in 2020-2022, achieving net profit of 290 million, 430 million and 580 million, corresponding to PE 27 times, 18 times, and 14 times. Considering that the company's downstream orders continue to grow rapidly, and the company is actively exploring expansion from incremental markets to stock markets, the business strategy continues to shift to a cloud-based service model, covering the “buy” rating for the first time.
Risk warning
1) Policy progress fell short of expectations, affecting the release of downstream demand; 2) In-hand orders fell short of expectations; 3) The development of COVID-19 exceeded expectations, etc.
