2020Q3 achieved operating income of 60.53 million yuan, down 8.10% from the same period last year, and its net profit was 7.02 million yuan, down 29.50% from the same period last year. The overseas epidemic affected the short-term business development of the company, with a decline in revenue; exchange losses affected the company's profitability and net interest rate decreased; in the long run, the company continued to increase the layout of R & D and improved product lines, and is expected to continue to benefit from the global public network and private network construction demand brought about by technological changes such as 5G/F5G, and maintain the "overweight" rating.
The overseas epidemic has affected the development of business, and revenue has declined. From the perspective of the domestic market, private network business benefits from emergency information construction and is expected to maintain a relatively high growth rate throughout the year; some products of public network service 5G/F5G have made breakthroughs and started small-scale procurement, and orders are expected to be released in 2021. Overseas markets, 2020Q3 India and other markets, the epidemic is particularly serious, restricted by the epidemic prevention and control, the company's employees abroad to carry out related business has been affected, resulting in a decline in overall revenue in the third quarter. The company's end customers are concentrated in telecom operators, the government, etc., customers usually implement the budget management system and centralized procurement system, and product delivery and acceptance are mostly concentrated in the fourth quarter (revenue accounted for 41.48% of the revenue in the fourth quarter of 2017 / 2018 / 2019). Therefore, 2020Q4 is expected to have a greater impact on the annual performance, and the specific impact of the overseas epidemic needs to be further observed.
Financial expenses affect profitability, and the net interest rate has decreased. Although the development of 2020Q3's overseas market business is limited by the epidemic, the company's gross profit margin remains at a relatively high level of 61.2%, and cost control is more effective in each period. Among them, the sales / management expense rate of 2020Q3 decreased by 1.46PCTs/0.55PCT to 12.89% and 14.62% compared with the same period last year, which was well controlled. The rate of R & D expenses further increased to 28.83%, maintaining a high level, and financial expenses significantly increased by 13.93PCTs to 7.25% compared with the same period last year due to exchange losses, which became an important reason for the decline of 3.84PCTs in the company's net interest rate compared with the same period last year. As a result, the year-on-year decline in net profit exceeded the decline in revenue.
5G/F5G and others are expected to drive the company's continued growth in the coming years. The company continues to increase research and development to build 5G/F5G end-to-end one-stop solution capacity. At the end of 2020H1, the number of R & D personnel increased to 294, accounting for more than 50% of the company's total R & D expenditure of 560.9 billion yuan in the first three quarters of 2020, an increase of 15.78% over the same period last year. About 200 million of the company's IPO fundraising plans to invest in 5G core network equipment development projects, and about 140 million plan to invest in next-generation Internet broadband access equipment projects. In the future, with the continuous progress of fund-raising projects, the company's 5G product line layout is gradually improved, and it is expected to have 5G core network, 5G O-RAN small base station access network, F5G access network, 5G private network, 5G RCS application and other service capabilities in the future. At present, the company has made a breakthrough in the domestic operator core network, access network, RCS application and other markets. Although the current order is small, it also lays the foundation for future business development.
Risk factors: the company's new product research and development and new market expansion are not up to expectations; fund-raising projects are not progressing smoothly; the impact of overseas epidemic is uncertain; global trade frictions and geopolitical risks; intensified market competition; exchange rate fluctuations.
Investment suggestion: the company continues to increase R & D and improve the layout of its product line, and is expected to continue to benefit from the global public network and private network construction demand brought about by technological changes such as 5G/F5G, maintaining the company's 2020 prime 2021 EPS forecast of 0.47mp 0.81 pound 1.23 yuan in 2022, maintaining the "overweight" rating.
