Incidents:
The company released its report for the third quarter of 2020 on the evening of October 29, 2020. The announcement showed that the company achieved operating income of 1,473 billion yuan in the first three quarters, an increase of 1.39% over the previous year; net profit attributable to shareholders of listed companies was 131 million yuan, a slight decrease of 3.23%.
Q3 Net profit increased by 55.5% in a single quarter
The company achieved revenue of 384 million yuan in a single quarter, an increase of 5.31% over the previous year; net profit attributable to shareholders of listed companies was 15.9 million yuan, an increase of 55.5% over the previous year; net cash flow from operating activities increased 192.53% over the same period of the previous year. The company's business development and project implementation progressed in an orderly manner in the third quarter, and the company's profits grew relatively well.
The urban brain strategy is progressing steadily
The company's Urban Brain related software platform has also been deployed and applied in key cities. Thanks to the demonstration effects of model cities, the company has signed strategic cooperation agreements with 33 local governments and developed Urban Brain's business layout.
In terms of grassroots social governance, the company's township (street) level digital cockpock/town street brain business is well promoted. On the basis of the successful delivery of the first phase of the digital cockpit platform in Sandun Town, Hangzhou, the company recently successfully won the bid for the second phase of the project. At the same time, in September, the company successfully won the bid for the Leijie Street Street Brain Platform (Phase I) in Xihu District of Hangzhou, and the company's grassroots governance brain was replicated.
Currently, the company's Hangzhou Traffic Brain, Shenyang Health Brain, Shanghai Judicial Brain, and Zhenjie Brain (digital cockpit) are operating well, and have been recognized by relevant departments and the general public. The transformation and upgrading of urban brain service providers and project implementation have been further promoted.
We judge that the COVID-19 pandemic, which began at the end of 2019, is likely to continue for a long time. At that time, the impact on the global economy will be enormous. New domestic infrastructure is an important means of supporting it, so it is likely that new infrastructure will flourish, and companies may fully benefit.
Investment advice
We expect the company's net profit for 2020-2022 to be 182 million, 243 million and 300 million yuan respectively. The corresponding EPS for the 2020-2022 period will be 0.28, 0.37 and 0.46 yuan respectively, and the corresponding PE will be 37.3, 27.8 and 22.5 times respectively, giving it a “buy” rating.
Risk warning: Risk of macroeconomic fluctuations; project progress falls short of expectations.
