The company forecasts a net profit of RMB 1.18-234 million yuan in 2020.
The company announced that the net profit of 2020 is expected to be 1.18-234 million yuan, a decrease of 60% to 80% compared with the same period last year, deducting the non-return net profit of 1.49-223 million yuan, and 40% less than the same period last year. 4Q20 had a net loss of 33.43 million yuan to a profit of 82.57 million yuan, deducting a net loss of 6.71 million yuan to a profit of 67.29 million yuan, which was lower than we expected, mainly because the business development was lower than expected and the fair value of Gui-Guang network shares decreased significantly compared with the same period last year.
Pay attention to the main points
The epidemic situation and the downward trend of the industry affect the development of business, and the superposition of fair value losses leads to a decline in profits.
On the revenue side, we believe that on the one hand, the cable TV industry is facing competition from IPTV, OTT and other new media and the overall decline may lead to the loss of cable TV users; on the other hand, affected by the epidemic, the engineering construction, marketing and advertising business of the company's HD interactive digital TV and home broadband business may be affected, resulting in a decline in the company's operating revenue. In addition, the company holds 3.8% of the shares of Guigang Network, and we estimate that the fair value loss will be about 100 million yuan due to the fluctuation of the stock price.
We judge that with the epidemic gradually under control, the company's business may recover in 2021, but the company's profit scale and gross profit margin have shown a downward trend since 2018, and the cable TV business is still facing fierce competition.
The progress of national network integration is worthy of attention, and the company may benefit as an important participant. On October 12, 2020, China Radio and Television Network Co., Ltd., a national network joint-stock company, was officially put into operation, in which the company's controlling shareholder, Beiguang Media Investment Center, contributed 265 million shares of the company (accounting for 19.09% of the total share capital). The transfer registration was completed on December 21, 2020, the controlling shareholder of the company was changed to radio and television shares, and the actual controller was changed from Beijing Radio and Television to the State Council. On January 26, 2021, China Radio and Television and China Mobile Limited signed a 5G strategic cooperation agreement in Beijing, officially launching 700MHz 5G network co-construction and sharing. We believe that the promotion of national network integration is expected to promote resource integration, sharing and co-construction, and achieve economies of scale; at the same time, problems such as the dispersion of frequency band use rights in the radio and television system are also expected to be solved, thus paving the way for radio and television 5G network construction and 5G application. We believe that, as the only provincial network listed company funded by shares, the company plays an important role in the integration of national network, or benefits from the integration of resources to enhance the competitiveness of the industry; the follow-up progress of national network integration and radio and television 5G, as well as the development of media technology platform, ultra high definition content, smart city and other emerging businesses in this context deserve our attention.
Valuation and suggestion
Due to the continued pressure on the company's cable business, we have reduced the net profit of homing in 2020 and 2021 by 29.7% and 6.4% to 177 million yuan and 518 million yuan respectively, and introduced the forecast net profit of 562 million yuan in 2022. The current share price corresponds to 23.3 times 2021 earnings.
To maintain a neutral rating, taking into account the downward revision of earnings forecasts and the fierce competitive environment faced by the company's main business, we lowered our target price by 22.0% to 9.30 yuan, corresponding to 25 times 2021 price-to-earnings ratio, which has 7.4% upward space compared with the current stock price.
Risk.
The epidemic situation is repeated; the progress of national network integration is not as expected; the competition in video and broadband services is intensified; and the loss of users.
