Brief comment on performance
The company disclosed its annual report in 2019 that its operating income was 2.693 billion yuan, down 24.41% from the same period last year; the net profit belonging to shareholders of listed companies was-1.157 billion yuan, down 314.48% from the same period last year; and the deduction of non-net profit belonging to shareholders of listed companies was-1.183 billion yuan, down 325.36% from the same period last year. At the same time, the company released the first quarterly report of 2020. the operating income in the first quarter was 381 million yuan, down 62.30% from the same period last year, and the net profit was-59 million yuan, down 144.01% from the same period last year.
Business analysis
The two major businesses of focus car networking and public security law enforcement have experienced a decline in profitability in the throes of transformation. In 2019, the company continued to focus on the main waterway, and the public security industry and the transportation industry accounted for 36.98% and 36.38% of the revenue respectively, becoming the two downstream core industries. The transition period resulted in a decline in the company's gross profit margin and a surge in expenses. The company tightened PPP and BOT projects, mainly doing BT projects with low gross profit margin and quick payback, resulting in a 8.47% drop in gross profit margin. In addition, the company strengthens the sales investment of public security business and introduces management system and consulting organization, which leads to the increase of sales and management expenses. We believe that in the short term, the transformation of the company will bring pain such as cost growth, revenue and net profit decline, and pay attention to the long-term development of the company.
Car networking products are actively laid out, waiting for the downstream market to start. In 2019, the car networking business was mainly in the testing phase, and the pilot demonstration project of the company's 5G-V2X innovation scheme was launched in Guangzhou Biological Island; the self-developed C-V2X module and terminal successfully passed the country's first "four-span" interconnection test. Vehicle products achieve adaptive adaptation of more than 14000 models around the world, and become suppliers to large vehicle manufacturers such as Geely, Changan, BYD, Guangzhou Automobile, etc., and will jointly launch 5G Internet models with Geely in 2021. The company has a first-mover advantage in the layout of vehicle networking, and the product architecture is clear. The current vehicle networking industry is still in the stage of introduction and verification, and it is expected to speed up in 20 years.
Equity incentive and goodwill impairment, the company unloaded and then set out. The company's second phase of the equity incentive plan landed, and the performance evaluation target is to take 2019 as the base, and the revenue growth rate in 2020 and 2021 is not less than 30% and 70%. In 2019, the impairment of goodwill is about 1.07 billion yuan, and the remaining goodwill is 702 million yuan. We believe that the company's performance objectives are clear, the impairment of goodwill is relieved of the burden, and is optimistic about the medium-and long-term development of the transition.
Profit adjustment and investment suggestions
Taking into account the impact of the epidemic and business transformation on the company's business, we have adjusted the company's 20-year profit forecast. It is estimated that the company's income from 2020 to 2022 will be 2.867 billion yuan (- 61.5%) / 3.462 billion yuan / 4.134 billion yuan respectively, and the net profit of returning to the mother will be 49 million yuan (- 95%) / 122 million yuan respectively, corresponding to EPS0.028/0.069/0.09 yuan, downgraded to "overweight" rating.
Risk hint
Public security information bidding uncertainty; vehicle networking business development is not up to expectations; electronic license plate development is not up to expectations; goodwill impairment; epidemic impact.