Zhongxin Sike 1H22 performance is in line with our expectations
Zhongxin Secco announced its 1H22 results: revenue was 149 million yuan, down 56.64% from the same period last year, and its net loss was 106 million yuan, an increase of 61.2 million yuan over the same period last year. In the single quarter, 2Q22 revenue was 60.25 million yuan, down 61.54% from the same period last year and 31.95% from the previous year; the net loss from the parent was 50.82 million yuan, narrowing 5.91 million yuan from the same period last year and 3.89 million yuan from the previous quarter, which is in line with our expectations.
Trend of development
Income fell as a result of the epidemic. In terms of products, 1H22's revenue from broadband network products was 68.183 million yuan, down 57.58% from the same period last year; revenue from mobile network products was 33.778 million yuan, down 63.31% from the same period last year; revenue from technical services from network content security products was 14.211 million yuan, down 30.58% from the same period last year; big data's operating product income was 1.173 million yuan, down 89.32% from the same period last year; and revenue from industrial Internet security products was 244000 yuan, down 87.52% from the same period last year. At the downstream customer level, government revenue fell 59.41% year-on-year to 82.141 million yuan, accounting for 3.78 3.61ppt, while operator revenue fell 60.92% to 49.111 million yuan, accounting for a decline in revenue. The company's income is under pressure, mainly due to the impact of the epidemic situation at home and abroad: 1) the company's business in some overseas countries and regions is limited; 2) the signing and implementation of some domestic projects have been delayed. At the level of gross profit margin, 1H22's gross profit margin was 70.78%, down 1.21ppt from the same period last year. Among them, the gross profit margin of broadband products decreased by 1.31ppt to 85.52% year-on-year, and the gross profit margin of mobile network products increased by 3.58ppt to 72.09% compared with the same period last year. 61.69% gross profit margin of 2Q22, increased 4.81ppt year-on-year, decreased 15.27ppt month-on-month.
The investment in R & D is increased, and profits are under pressure in the short term. The 1H22 net loss rate of the company is 70.93%, which is 58.01% higher than the same period last year. The net loss rate of 2Q22 is 84.34%, the year-on-year expansion of 48.14ppt and the month-on-month expansion of 22.55ppt. The company's 1H22 sales / R & D / management expense rate is 54.89%, 82.61% and 23.57%, respectively, which is higher than the same period last year. 22.00/39.20/11.75ppt. The sales / R & D / management expense rate of 2Q22 Company is 61.19% / 100.02% Universe 29.15%, respectively, which increases 22.89/48.99/15.69ppt compared with the same period last year. The operating cash flow of 1H22 Company was-150 million yuan, and the net outflow decreased by 14.39% compared with the same period last year, of which the annualized turnover days of accounts receivable (593days), accounts payable (668days) and inventory turnover days (1959 days) were + 269days, + 398days and + 1103 days respectively.
Profit forecast and valuation
Keep profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to 34.3 pound in 2023, 34.3 in 2023, and 32.9 times Pax E. Maintain an outperform industry rating and a target price of 33.1 yuan, corresponding to 45.11% upside space compared with the current stock price.
Risk.
The expansion of new products is not as expected; the demand of downstream customers is not as expected.