Main points of investment

Items:

The company announced its mid-year report in 2019. In the first half of 2019, the company achieved revenue of 186 million yuan, an increase of 28.37% over the same period last year, and a net profit of 21.23 million yuan, an increase of 49.74% over the same period last year. The basic EPS was 0.19 yuan. There was no dividend or transfer plan in the middle of the year.

Peace viewpoint:

Revenue growth is good, but orders still need to be further transformed: in the first half of the year, the company achieved revenue of 186 million yuan, an increase of 28.37% over the same period last year, including 81.66 million yuan for medical information system business and 83.6 million yuan for scene application business. the year-on-year growth rates were 13.85% and 60.59%, respectively. Overall, the company's revenue side growth is good, especially the scene application business growth is strong, but compared with the company's on-hand orders, the revenue growth potential has not been fully released.

He Rending is located in the overall solution provider, mainly based on the general contract model, and the main customer group is the large and medium-sized hospitals with more complex needs. Most of these general contract orders are planned in the first half of the year and signed by tender in the third and fourth quarters. Considering that the project implementation cycle of the company is usually about one year, and the settlement time of large-scale hospital projects is generally close to the end of the year, most of the revenue is recognized in the second half of the year. The company's orders grew strongly last year, and most of them were generated in the second half of the year, so the conversion of orders is expected to accelerate in the third and fourth quarters of this year, and revenue growth is expected to increase significantly.

Profit growth is strong, the growth rate is significantly higher than income: in the first half of the year, the company achieved a net profit of 21.23 million yuan, an increase of 49.74% over the same period last year, and even as high as 58.15% after deduction, both significantly higher than income. From the perspective of disassembly, the company's comprehensive gross profit margin rose 3.23 pct to 47.36% compared with the same period last year, which is the main reason why the profit growth rate is higher than revenue, which should contain the positive impact of the revenue recognition point, and it is expected that the comprehensive gross profit margin will remain at a normal level for the whole year. From the expense point of view, the year-on-year increase in sales / R & D expenses is lower than or basically consistent with the income growth, but the management expenses have increased significantly by 62.6%. This is mainly due to the change in the accounting method of the company's equity incentive plan, resulting in a sharp increase in the corresponding equity incentive fees, which will have a certain impact on the full-year book profits.

The product layout is more perfect and the market expansion is good: in terms of product R & D layout, the company's new generation hospital information system is well applied in the seed customer Zhejiang Provincial people's Hospital, and is listed as a typical case of modern hospital medical insurance fine management with the first total score. The real-time application of "HI Doctor" APP in the company's "cloud-to-end" scenario can seamlessly interface with different HIS, providing real-time and consistent online and offline data for medical staff, and improving work efficiency and quality. The company's regional platform has made progress in the Hangzhou "Urban brain Health system" Shu Xin medical platform project, has completed full access to 245 municipal public medical institutions, and has begun to provide services such as "see a doctor first and pay later".

In terms of market expansion, the hospital IT business has successively won the bid for large-scale projects such as the intelligent informatization of Jiangxi Children's Hospital Honggutan Hospital, the construction of industry cooperation platform of the third affiliated Hospital of Air Force military Medical University, and the regional medical business has won the bid for Jiangsu Province liver Health Alliance Information platform, Guangyuan resident Health Card Service, Qidong City "Internet + Medical and Health" and other projects.

Profit forecast and investment suggestion: we adjust the company's profit forecast mainly in view of the change in the accounting method of equity incentive expenses and the change in the amount of equity caused by the transfer in the middle of the year. It is estimated that the EPS from 2019 to 2021 will be 0.59 (- 0.32), 0.96 (- 0.42) and 1.40 (- 0.57) respectively. Corresponding to the closing price on August 30 (28.8 yuan), the PPink E is 49.0x, 29.9x and 20.6x, respectively. We believe that Heren is a small and beautiful medical IT enterprise, and its business positioning is different from that of most competitors. As the medical IT industry under the catalysis of policy enters a boom period, it has long-term growth potential; in the short and medium term, the company has abundant orders on hand, which can at least support the rapid growth in the next 1-2 years. Based on this, we are optimistic about the company's growth prospects and continue to maintain the "highly recommended" rating.

Risk Tips:

1) the order of the hospital-end project is lower than expected. Heren is a hospital-side overall IT solution provider, positioning to form a certain differentiation, such as this differentiation can not be converted into full orders, or the lack of demand for complex solutions in most hospitals will be a drag on long-term growth.

2) the progress of the construction of medical federation is slow. The construction of medical federation based on urban medical group / county medical community is one of the current policy priorities, and the corresponding regional platform business is an important focus of the company. if the construction of medical consortium is slow, it will affect the growth of this business.

3) the risk of high fluctuation of income and profit. As Heren mainly provides hospital-wide and city-county regional platform solutions, the amount of project orders is higher than that of the same industry, but the enterprise scale is still small at this stage, and its revenue recognition time has a greater impact on financial indicators.

4) transactional / liquidity factors. As a small enterprise listed for less than 3 years, its market capitalization is small and the proportion of tradable shares is low, and the stock liquidity is poor. Coupled with the impact of the release of restricted shares of IPO shareholders, its stock price fluctuates violently.

5) the risk of historical bad debts. In recent years, the company's performance is greatly affected by the bad debt provision of historical project receivables, if the project money is still unable to be recovered, the corresponding bad debt provision will still erode the book profit obviously.