Report summary:
Revenue continued to grow steadily, and gross margin picked up slightly. 2017H1 achieved revenue of 628 million yuan, an increase of 19.80% over the previous year; its net profit was 258.582 million yuan, down 7.29% from the previous year; EPS was 0.06 yuan, down 14.29% from the previous year; and the overall gross profit margin was 28.90%, up 1.1 percentage points from last year. By business, network optimization achieved revenue of 328 million yuan, an increase of 2.17% over the previous year; the network construction business achieved revenue of 115 million yuan, a decrease of 31.92% over the previous year; Internet services merged for the first time, achieving revenue of 138 million yuan, net profit of 305.943 million yuan, and gross margin of 36.26%.
NetPremium's business position is leading, and customer resources remain stable. The company is one of the top three companies in the third party mobile communication technology network advantage business. Benefiting from large-scale commercial use of 4G, network capacity continues to increase, and the company has achieved continuous growth in performance. In terms of operator customers, business has remained stable in several major provinces such as Guangdong and Zhejiang. On the customer side of major equipment manufacturers, the business volume and engineering regions of Huawei, ZTE, and Noci remained stable.
Continue to explore network construction business and actively lay out 5G network construction. The company continued to explore business cooperation with mobile operators, successfully shortlisted ICT project comprehensive partner technology service projects in Shanghai, and participated in pre-sales and in-sales work of ICT projects such as smart WIFI, integrated wiring, ICT computer room construction, intelligent cloud video surveillance, etc. At present, the peak of 4G construction in China has passed, and the company's revenue has also declined, but the company has been paying attention to studying the high-frequency wireless signal requirements to ensure the quality of 5G standard network services, and is expected to achieve a reversal in performance during the 5G construction period.
The acquisition of 51% of the remaining shares in Connected Port has been accepted, and it has entered the Internet service business. On June 29, 2017, the company's acquisition of 49% of the remaining shares in Connected Port was reviewed by the Securities Regulatory Commission. After the restructuring, the company will hold 100% of the shares in Connected Port. Currently, the connected port business includes IDC and cloud computing services, virtual private network services, Internet access services and other value-added services. The company's acquisition is expected to create a hybrid cloud ecosystem covering multiple vertical segments and achieve rapid growth in performance.
Profit forecast and investment advice: The company entered the Internet infrastructure service sector. The estimated revenue for 2017-2019 was 1,717 million yuan, 1,991 million yuan and 2,437 million yuan respectively; the net profit of the mother was 149 million yuan, 207 million yuan and 298 million yuan respectively; EPS was 0.31 yuan, 0.43 yuan and 0.62 yuan respectively; and dynamic PE was 24 times, 17 times and 12 times, maintaining the “increase in holdings” rating.
Risk warning: The risk of increased competition in the network optimization and network construction market.
