Main points of investment

Items:

The company announced that the revenue of the company in the first three quarters of 2020 was 627 million yuan (- 30.22%YoY), and the net profit attributed to the shareholders of the listed company was 23 million yuan (- 84.18% YoY).

Peace viewpoint:

The epidemic affects the company's performance and increases the development of the domestic market: in the first three quarters of 2020, the company achieved revenue of 627 million yuan (- 30.22% YoY) and net profit of 23 million yuan (- 84.18%YoY) belonging to shareholders of listed companies. In the first three quarters of 2020, the company's overall gross margin and net profit margin were 36.27% (- 7.70pctYoY) and 3.48%, respectively. On the one hand, the decline in the company's performance is due to the fact that the company's overseas LED display business orders and business development have been greatly affected by the continuing overseas epidemic. It is estimated that the company's LED display business in the first three quarters decreased by 32% compared with the same period last year; on the other hand, under the background of the domestic epidemic and tightened macro policies in the first half of the year, the growth rate of domestic landscape lighting business declined. The company's overall performance is lower than expected. Looking ahead to 2020Q4 and 2021, LED is expected to show that the business will recover as the epidemic is controlled or the vaccine is put on the market, and the financial technology business will also contribute stable revenue and profits. Cost side:

In the first three quarters of 2020, the company's financial expense rate, sales expense rate, management expense rate and R & D expense rate were 1.30% (1.77pct YoY), 13.75% (2.06pct YoY), 8.53% (2.90pctYoY) and 8.60% (1.96pct YoY), respectively. In the context of the epidemic, the company increased its efforts to expand the domestic market, expand the domestic sales team, actively build channels, and increase the management expense rate and sales expense rate. In addition, the company's LED display business is mainly export, affected by the appreciation of the RMB in the third quarter, resulting in an exchange loss of about 10 million yuan.

Optimization of financial technology and LED to build an enabling management platform: the company continues to optimize the layout of LED applications and financial technology: in the field of financial technology, companies comply with bank outlets.

The trend of intelligence such as telecommunications outlets has increased the development of financial science and technology business, gradually upgrading from the traditional queuing system and lattice display screen to intelligent robots, and providing intelligent products and systems for China Telecom Corporation's first intelligent business hall and other customer outlets. The company has participated in the implementation of a number of benchmarking intelligent banking projects, and gradually explore new intelligent products and intelligent applications of bank outlets. LED display field: the company adheres to the marketing strategy of large market and key customers, and provides customers with high-quality high-end LED display solutions with innovative technology and stable performance. Relying on the first-mover advantage of Mini LED display products and increasing the market development of conference rooms and other segments of the market, the company has completed a number of projects, including China China Construction Bank Corporation Shanghai Kechuang Financial Core Lab, Switzerland Schindler City Center, China Merchants Bank Shenzhen Branch, and Shenzhen Bay Laboratory of Peking University Shenzhen Graduate School.

Investment strategy: taking into account the impact of the epidemic and macroeconomic downturn on landscape lighting and LED display business, we downgrade the company's profit forecast and estimate that the company's net profit attributable to the parent company in 2020-2022 is 146x199 million yuan (the original value is 1.20pm 2.05max 271 million, corresponding to PE is 49-23-17 times. The company continues to cultivate LED display and financial technology business, especially Mini LED display products are expected to gradually increase volume, optimistic about the company's future performance flexibility. Considering that the company's performance was affected by the epidemic in the short term, the company's rating was downgraded from "recommended" to "neutral".

Risk hint: 1) the risk of contract performance: there is a certain period in the execution of the contract, and it is affected by factors such as unpredictability or force majeure in the actual performance, which may lead to the risk that some or all of the contents of the contract cannot be performed or terminated. 2) the risk that accounts receivable can not be collected on time: most of the company's landscape lighting projects are paid by installments and there is a certain account period, so there is the risk of not being collected on time; 3) the risk of technological progress: in the sports display application system, the requirements of the LED display around the stadium are more stringent, and its corresponding technical content is higher, if the company can not continue to invest in research and development, there is a risk of customer loss. 4) the risk of trade friction: due to the instability of the international political and economic environment in recent years, there is greater uncertainty in some of the company's overseas markets, such as the North American market, especially the recent changes in Sino-US trade policy. if the trade protection policy is gradually implemented, it may have a certain impact on the company's business in North America.