Incident: On the evening of October 28, 2020, the company released its report for the third quarter of 2020. It achieved operating income of about 410 million yuan in the first three quarters, an increase of 37.77% over the previous year, a net profit of 88 million yuan, an increase of 107.76% over the previous year, and achieved net profit of 75 million yuan after deduction, an increase of 72.40% over the same period. At the same time, the company issued a warning about major changes in annual performance: “Net profit for the full year of 2020 is expected to increase significantly compared to the same period last year.”
Revenue confirmation peaked in the fourth quarter, and the full-year results are worth looking forward to. The company's gross margin for the first three quarters was 47.84%, which was basically the same as the semi-annual report. R&D investment increased 42.92% year-on-year, higher than the revenue ratio, and maintained a strong R&D investment. As the company's business scale continued to expand and the number of employees increased, sales expenses and management expenses in the third quarter alone increased by 88.94% and 43.80%, respectively.
The relevant rules disclosed in the performance (forecast) of listed companies generally define that a year-on-year fluctuation of more than 50% in performance falls into the category of significant increase. The company's net profit for the full year of 2019 is about 1.19 yuan. Therefore, we estimate that the lower net profit for the full year of 2020 is about 178 million yuan, and high annual performance growth can be expected.
Maintain a “buy” rating. We expect the company to achieve revenue of 789 million yuan, 1,194 million yuan, and 1,643 million yuan in 2020-2022, while the corresponding net profit attributable to the mother is 240 million yuan, 392 million yuan, and 568 million yuan respectively.
Risk warning: increased risk of market competition; risk of technological innovation; risk of declining gross margin; risk of deviations in assumptions and estimates.