Event

The company released its mid-year report in 2020, with operating income and net profit of 244 million yuan and 34.35 million yuan respectively, an increase of-44.96% and-62.27% respectively over the same period last year.

Comment

Affected by the epidemic and the delay in project acceptance and settlement, the company's revenue declined significantly. Affected repeatedly by COVID-19 's superimposed epidemic in Beijing, the company's offline market sales and on-site service progress were greatly affected (sales expenses were 9.17 million, down 57% from the same period last year), and there were major problems in project acceptance and project schedule settlement. The company's semi-annual contract performance cost reached 280 million yuan, an increase of 160% over the same period last year, based on the company's 40-50% gross profit margin. Compared with the same period last year, the incremental cost of 170 million yuan corresponds to about 300 million yuan in revenue, taking into account factors such as the intensity of grid investment and the project implementation cycle this year, most of these projects that have been invested in costs but have not been settled should be successfully delivered for acceptance this year, so the revenue growth rate of Q3-Q4 should be reflected.

The proportion of 3D design plates benefiting from the company's high gross margin has increased significantly, with the company's gross profit margin reaching 53.4% in the first half, up nearly 10 percentage points from the same period last year.

The business momentum of 3D design software continues to make progress, the progress of the business of placing electricity plates is relatively slow, and the progress of infrastructure EPC construction is greatly affected by the epidemic. Design section: the company's product 3D design software and offline project 3D design software services, as well as 3D design technical services provided by online design institutes continue to grow. The revenue of the company's design board reached 190 million yuan, an increase of 15.8% over the same period last year. We believe that the new round of UHV construction is expected to make. Distribution power section: affected by the process of power reform and the epidemic situation, the demand for technical services such as distribution power information software and distribution network operation and maintenance has decreased significantly compared with the same period last year, and the revenue of this section is only 9.62 million yuan. however, the park incremental power distribution project advocated in the eighth article of system reform still has a good development prospect in the long run. Infrastructure management section: last year, the newly signed Xingyi EPC project 625 million, no revenue confirmation in the first half of the year, but for construction and infrastructure management enterprises to build smart construction products based on BIM technology have been applied in a number of UHV projects, power infrastructure management based on cloud platform SAAS application enabling traditional infrastructure management has broad prospects, and transportation, water conservancy intelligent infrastructure will further raise the ceiling of the company.

Speed up the cloud transformation strategy and technology precipitation to practice internal skills. The number of cloud service users of the company in the first half of the year was 72000, an increase of 8000 in half a year. The company, together with China Power Union and other organizations, vigorously promoted the cloud service platform through free cloud service activities, public welfare classes, press conferences and other means. In addition, the company actively tackles key technical iterations such as BIM graphics engine, visualization platform and GIS Earth, and participates in a number of industry standards as the lead unit.

Profit forecast and investment advice

Affected by the repeated epidemic situation in Beijing and the delay in project acceptance and project settlement, the 2020-2022 net profit is 368 million (- 9%), 475 million yuan (- 6%) and 614 million yuan, and the company's three-year PE is only 17x, 13x and 10x, which is significantly lower than the valuation of other companies in the board.

Risk hint

The investment in power grid informatization is not as expected; the promotion of incremental distribution network is not as expected; and the company's accounts receivable have increased significantly.