Leading industrial equipment protection service provider, focusing on anti-wear and anti-corrosion field and Internet technical service Evergrande Hi-Tech was founded in 1993, is the domestic comprehensive industrial equipment anti-wear and anti-corrosion products production and technical services of the leading enterprise. In 2017, the company successfully cut into the Internet software distribution business through the merger and acquisition of Wuhan Feiyou and Changsha Jufeng, and in 2019 the company added Internet advertising agency business. Relying on its West West Software Park, PC6 download station, east-west mobile game assistant and other website portals, the company has entered the Internet field on a large scale. The proportion of Internet business revenue has been stable at about 45% in the past three years, and the dual-main business pattern is stable.
Revenue stabilized, gross profit margin rose as a whole, expenses were well controlled, and R & D investment increased year after year. Since the launch of the Internet business in 2017, the company's revenue has shown an obvious inflection point, with a compound revenue growth rate of 36.7% in the three years from 2017 to 2019. The decline in 2020H1 performance is due to the fact that the acoustic noise reduction business is not as expected and the epidemic. On the cost side, the management expense rate in the first half of 2020 was 11.19%, which decreased year by year since 2016, the sales expense rate dropped from 14.37% in 2016 to 4.24% in 2019, and the financial expense rate remained below 1%. In addition, the company pays attention to research and development. In 2019, the R & D cost is 19.12 million yuan, and the R & D expenditure rate is 5.06%. The company will continue to increase R & D investment and maintain technological leadership.
The proportion of Internet marketing in China continues to rise, the environmental protection industry has broad prospects under the catalysis of policies, and the company's "environmental protection + Internet" two-wheel drive ensures performance growth.
The development of energy conservation and environmental protection industry is supported by national policies, and the expenditure on energy conservation and environmental protection in public financial expenditure has increased from 264.098 billion yuan in 2011 to 744.357 billion yuan in 2019, an increase of nearly twice as much as that of the industry. The development of waste incineration and acoustic noise reduction business is in line with the trend of improving people's living standards, and the market space can be expected in the future. According to iResearch, the online advertising market reached 646.43 billion yuan in 2019, an increase of 30.2% over the same period last year, still maintaining rapid growth. The company's Internet marketing business achieved an operating income of 174 million yuan in 2019, an increase of 10.19% over 2018. Of this total, Tencent Ad solutions achieved revenue of 13.254 million yuan, an increase of 227.90% over the same period last year. In September 2020, the company plans to invest 10 million yuan to set up Baole Interactive, strengthen the management and development layout of Internet business, and actively promote Internet business and team integration, which is expected to form an ecological closed loop in the future.
Environmental protection business solid superimposed Internet marketing potential is expected, for the first time to cover the "recommended" rating we are optimistic about the company's solid position in the environmental protection industry, the future integration of the Internet sector will bring synergy to the company, incremental is expected. It is estimated that the company's net profit from 2020 to 2022 is RMB 0.95 million, an increase of 12.3%, 17.6%, 12.9%, and the corresponding EPS is 0.31, 0.37 and 0.41 yuan, respectively. The current stock price corresponds to the 2020-2022 PE, which is times that of 23-20-17. For the first time, the company is given a "recommended" rating.
Risk hint: the competition in the waste incineration market aggravates the risk, the noise reduction market is not as expected, and the goodwill risk