Overview of events
Dashi issued a third-quarter results announcement, with operating income of 2.09 billion yuan in the first three quarters, an increase of 33.2% over the same period last year, and a net profit of 210 million yuan, a substantial increase of 63.6% over the same period last year.
Analysis and judgment:
The performance continues to grow at a high level. The annual profit is expected to be 2.7-340 million yuan, an increase of 180% over the same period last year. According to the company announcement, the company achieved high growth due to the data center business growth, the PPP project entering the implementation stage, and other traditional business growth. Among them, 2020Q3 single-quarter net profit was + 104.1% compared with the same period last year. Significantly higher than 2020Q1-2 single-quarter return net profit growth rate of 14.5% 57.1%. The cash flow became positive during the reporting period, with operating net cash flow totaling 50 million yuan in the first three quarters, and operating net cash flow in the single quarter of 2020Q1-3 was-2.1 billion yuan, respectively. Considering that Q4 is the company's peak payback period, we expect operating net cash flow to further improve throughout the year. In addition, the company announced that it expects to make a profit of 270-340 million yuan in 2020, an increase of 180% over the same period last year. We believe that the management team will give full play to its competitive vitality under the company's high order boom and equity incentive (according to the exercise requirements, the net profit for 2020-21 will not be less than 287 billion yuan). We expect the company's performance to enter a high-speed growth channel, with a PE of only 18x in 2021E, undervalued + high-growth typical small and beautiful varieties.
Downstream orders remain high, and future performance is worth looking forward to.
Benefiting from the influence of the landing of the new infrastructure policy and the catalysis of COVID-19 's epidemic situation, the prosperity of orders continued to rise in 2020. According to the company announcement, 2020H1 won the bid and signed orders of 2.7 billion, year-on-year + 70%, of which 2020Q1 won the bid and signed orders of 1.3 billion, + 42% of the same period last year, 2020Q2 won the bid and signed orders of 1.2 billion, year-on-year + 110%, of which data center, smart transportation, smart medical and other subdivisions maintained a high level of momentum. The 2020H2 data center business won a contract of 600 million yuan, a year-on-year increase of more than 10 times. The order of 2020Q3 Company has maintained a high bearing, and has successively won the bid for the mechatronics project of the medical and surgical ward building of Suzhou Hospital New area (contract value 235 million yuan), Fuzhou Rail Transit Line 5 Phase I project comprehensive monitoring project (contract value 97.92 million yuan) and a number of large orders. We expect the company's annualized order amount to increase by 70% year on year in 2020, laying a solid foundation for the company's high performance growth in the future.
Join hands with Tencent Medical to promote smart medical business.
In September, the company announced that the holding subsidiary Dashi Qiyun and Tencent Medical and Health (Shenzhen) signed a strategic cooperation agreement, and the two sides carried out cooperation in the fields of healthy city, regional medical care, and smart hospitals, specifically covering Internet hospitals, smart hospitals, mobile health care, smart health insurance and other aspects of construction cooperation. The two partners have strong strength in their respective fields. Tencent Health is a wholly owned subsidiary of Tencent Group. Dashi Banner Cloud, as a leading regional medical big data construction and operation service provider, was formerly known as Dashi Intelligent and Intelligent Medical Department. the signing of this strategic agreement is expected to significantly accelerate the landing of the company's intelligent medical business.
The strategic transformation of the company has achieved results, and the project type has marched into the product type. In the future, it is worth looking forward to the company's clear positioning as a "smart Internet of things solution" construction service provider. In recent years, the strategic transformation has achieved results: 1) at the technical level: in 2020, the company's software capability won the most difficult CMMI5 certification in the world, and built a core technology system such as AIoT intelligent Internet of things management and control platform and edge controller / C3 intelligent terminal system. 2) Business level: the operation business continues to land, and the company's operating income has reached the order of 10 million in 2019, and is expected to maintain a trend of rapid growth in the future. in addition, the newly won contracts such as the intelligent project of former Haiguiwan Park show a clear trend of the company's product software. In the past few years, the company's image to the market has been basically project-driven, and valuations have been suppressed in recent years after the high growth period of the project. At this stage, with the transformation of the company to the IoT overall solution provider, paying more attention to product capabilities and operational capabilities, we believe that the company valuation is also expected to return to the industry average.
Investment suggestion
We maintain the previous profit forecast, and we expect the company to achieve operating income of 3.21 billion, 4.39 billion and 6.02 billion respectively from 2020 to 2022, and net profit of 290 million, 430 million and 580 million respectively, corresponding to PE of 27 times, 18 times and 14 times, taking into account the high growth of orders downstream of the company, and the company is actively exploring the expansion from the incremental market to the stock market. The business strategy continues to shift to the cloud + service model, maintaining the previous rating and giving the company a "buy" rating.
Risk hint
1) the policy promotion is not as expected, affecting the release of downstream demand; 2) the promotion of hand-on-hand orders is not as expected; 3) the development of COVID-19 epidemic is beyond expectations.
