Events:
On the evening of January 15, the company issued a performance forecast for 2020: it is expected to achieve a net profit of 7000-80 million yuan belonging to shareholders of listed companies in 2020, an increase of 124% over the same period last year. Due to the appreciation of the RMB, there were exchange losses of 27 million yuan, of which about 18 million yuan were lost in the fourth quarter. In this regard, our comments are as follows:
Main points of investment:
After deducting the impact of exchange losses, the net profit is in line with expectations, and the inflection point has been established that the net profit attributed to shareholders of listed companies is expected to reach 7000-80 million yuan in 2020, a year-on-year increase of 124% muri 156%. After deducting the exchange loss of 27 million yuan, the attributable net profit is 9700-107 million yuan, which is in line with our previous forecast of 97 million yuan. Among them, the attributable net profit in the fourth quarter was 635.09-16.3509 million yuan, with a median of 11.3509 million yuan, a year-on-year increase of 119.54%. Every quarter in 2020 achieved year-on-year growth, and the inflection point of performance has been established. The reason for the big increase in performance is that, on the one hand, the new products that the company has continuously invested in research and development in the past few years, such as artificial intelligence, have gradually entered the harvest period, and on the other hand, infrared temperature measurement products developed to deal with the epidemic have sold well, driving the company's revenue and gross profit margin to increase at the same time.
Continuously increase R & D investment, raise investment in Huizhou project and put into production, the company focuses on the security video surveillance market, mainly engaged in the research, development, production and sales of security video surveillance products, such as hard disk video recorders, cameras and video surveillance platforms. at present, it has formed a business system with equal emphasis on front and rear development and gradually providing overall solutions. The company attaches great importance to R & D investment. From 2017 to 2019, R & D expenses are 8023, 8810 and 106.11 million yuan respectively, setting new highs. The R & D expenditure rates are 15.36%, 14.45% and 16.68% respectively. It is rare for an enterprise of this size to invest so much in R & D. New products continue to emerge under high R & D investment: 1) around AI technology, four types of intelligent products are launched: face capture recognition, license plate capture recognition, intelligent alert, and structured video analysis; 2) temperature measurement products such as temperature measurement plate and thermal imaging infrared thermometer are launched rapidly in response to the epidemic; 3) Star Cloud, to meet the needs of industry development, launch cloud products. The company's products are constantly improving. at the same time, Huizhou, the company's listing and investment project, is expected to be put into production by the end of 2020, and the company's production capacity will increase to 4.5 million units from 1.21 million at the end of 2015. Continuous improvement of products + production capacity in place, the company is ready to start.
The transfer order of the foreign market and the continuous development of the domestic market, the company's steady growth is guaranteed. According to the China Industry Information Network, the size of the global video surveillance market has reached 36.54 billion US dollars in 2018, and the compound growth rate is expected to reach 16.1% in 2018-2023. Among them, the CAGR of the North American and Asia-Pacific markets from 2018 to 2023 is expected to be 15.6% and 15.5% respectively, and the industry will maintain rapid growth. The company's products are mainly sold to Asia, Europe, North America and other regions, accounting for 90% of overseas revenue. Recently, in the context of Sino-US trade friction, the company's ODM OEM production model is expected to benefit from the transfer of orders from the United States and its allies. The company's revenue in the US market grew by 38% in the first three quarters, exceeding the overall revenue growth rate of 16.69%, indirectly verifying the trend of order transfer. On the other hand, the company strengthens the development of the domestic market, focusing on the market of small and medium-sized projects such as schools, hospitals, governments and enterprise parks. The transfer of foreign markets + the continuous development of the domestic market, the company's stable growth is guaranteed.
Profit forecast and investment rating: cover for the first time and give "overweight" rating. Taking into account the impact of exchange losses, we slightly downgrade the company's profit forecast, the company is expected to 2020-2022 EPS of 0.33,0.50,0.64 yuan respectively, corresponding to the previous share price PE of 38,25,19 times, we are optimistic about the rapid development of the security video surveillance industry and the company's continuous R & D investment into the product harvest period, the company's valuation is relatively reasonable, to maintain the company's "overweight" rating.
Risk hints: 1) the risk that product research and development and promotion are not as expected; 2) the risk of intensified market competition; 3) the risk of falling market demand and gross profit margin; 4) the risk of Sino-US trade friction policy; 5) the risk of order transfer is not expected; 6) the risk of exchange rate fluctuations; 7) macroeconomic downside risks.
