This report is read as follows:
The company's three-quarter report is in line with expectations. Affected by the epidemic in the first three quarters, the company's business was blocked, but it improved quarter by quarter, with a significant improvement compared with the previous quarter; the company's enterprise short message sector has great potential for the development of the standard American stock Ringcentral.
Main points of investment:
Downgrade the profit forecast, lower the target price to 11.75 yuan, and maintain the "overweight" rating. The company's operating income in the third quarter was 691 million yuan, down 2.74% from the same period last year, up 9.8% from the previous month, and continued to improve. Considering that the company's business was greatly affected by the epidemic, we lowered our annual revenue forecast for 2020-21-22 to 37.53 (- 18.06%) / 45.96 (- 28.73%) / 5.727 billion yuan, and lowered the forecast of net profit to 1.83 (- 40.5%) / 4.42 (- 25.56%) / 505 million yuan, corresponding to EPS0.2/0.47/0.54 yuan. Considering that the company has obvious advantages as the leader in the operation and maintenance industry, it will be given 25 times PE in 2021 and the target price will be lowered to 11.75 (- 8.27%) yuan.
The net interest rate is under short-term pressure, and the R & D investment continues to increase. In the third quarter, the company's net interest rate was 2.28%, down 1.57pct from the same period last year and 3.38pct from the previous year, mainly due to the decline in revenue and the rigidity of labor costs, the increase of 1.4pct in management expenses and the increase in 0.8pct in sales expenses compared with the same period last year. The company continued to increase investment in 5G news research and development and intelligent management of 5G base stations, and R & D expenditure increased by 7.74% in the third quarter alone.
The industry trend of 5G network construction is worth looking forward to, and the enterprise short message service is expected to open the ceiling of company valuation. In October, the White Paper on Broadband Development in China (2020) was released, which injected new momentum into the development of the industry. Looking forward to the next few quarters, operators' capital expenditure continues to pick up, 5G large-scale investment has been promoted one after another, bringing development opportunities for the upstream industrial chain, and the industry has entered a continuous upward channel. The company's corporate text message plate on the standard American stock standard Ringcentral, downstream demand is strong and the growth rate is expected to accelerate, the valuation logic is expected to change.
Catalyst: operator 5G large-scale construction, enterprise SMS downstream demand enhancement risk hint: the company's internal control level is not as expected, domestic 5G construction is not as expected, and downstream customer expansion is not as expected.