The annual results for 2020 are in line with our expectations
Taiji shares announced full-year results for 2020: revenue rose 20.8 per cent year-on-year to 8.53 billion yuan, while net profit rose 9.9 per cent to 370 million yuan, in line with our expectations. The total amount of contracts signed by the company in the whole year reached 17.19 billion yuan, an increase of 50.4% over the same period last year. Abundant downstream orders lay a solid foundation for steady growth in the future.
Trend of development
Catch up with Xin Chuang opportunities and open up new areas of business growth. In 2020, the company's innovation business increased by 71.1% to 3.12 billion yuan compared with the same period last year, accounting for 37% of the revenue. In the field of public safety, with its rich experience and long-term cooperation in the field of government affairs, the company has accumulated a large number of stable and high-quality customer resources in government affairs, public security, national defense, enterprises and other industries. provide consulting, software development, comprehensive integration, data services and other integrated services. The year 2020 is the first year of the national Xinchuang industry, and the company's Xinchuang business has achieved rapid growth throughout the year, with a contract value of nearly 7 billion yuan, among which the subsidiary people's Congress Jincang is the leading company in the database field, and its customers are widely distributed in government agencies and large enterprises. We believe that the company's Xinchuang business is expected to benefit from the continuous growth of information demand and maintain long-term rapid expansion.
The new integrated data service model of "cloud + digital + application + ecology" promotes the digital transformation. In the field of government cloud, the company continues to maintain a leading edge, and the company successfully passed the security assessment of cloud computing services of the Central Network Information Office. According to the "2019 report on the Market share of China Government Affairs Cloud Service operators", the company's government affairs cloud market share reached 4.8%. In the aspect of industrial Internet, the company has seized the opportunity of enterprise digital transformation to build platform projects such as digital power plant, digital coal mine, intelligent thing couplet of electrical equipment and big data comprehensive safety management based on industrial Internet. We believe that in the future, the company will build an integrated solution and expand its business to the industrial Internet field with the technology and service experience accumulated in the government cloud, so as to continue to empower the energy, transportation, finance and other industries. In 2020, the company's revenue from cloud services, smart applications and services increased by 8.1% and 11.9% respectively compared with the same period last year. We believe that as the industrial Internet continues to push forward, the proportion of the company's emerging business will continue to increase.
Research and development efforts continue to increase, profitability will tend to be stable. The company continues to increase R & D investment, the annual R & D expenditure increased 41% to 600 million yuan compared with the same period last year, accounting for 7% of Prida's income, and the results of innovation will lay a solid foundation for digital transformation. The company's traditional system integration business revenue fell 3.5% year-on-year to 3 billion yuan, accounting for 17.8% of the year-on-year decline. We believe that with the decline in the revenue ratio of low gross margin business, the company's overall gross profit margin and profitability will tend to be more stable.
Profit forecast and valuation
Due to the increase in various expenses in the process of company transformation, we reduced the net profit in 2021 by 7.7% to 420 million yuan, and introduced a net profit of 450 million yuan in 2022. The current share price corresponds to a price-to-earnings ratio of 29.9 times 2022 / 28.1 times earnings. To maintain the outperform industry rating, taking into account the uncertainty of the company's business transformation and increased investment in the transition period, we lowered our target price by 40.9% to 28.35 yuan, corresponding to 36 times 2022 price-to-earnings ratio, which has 30.5% upward space compared with the current stock price.
Risk.
The development of emerging business is uncertain, and the transformation of cloud business is not as expected.
