Events:
A few days ago, the company released its three-quarter report in 2019, with operating income of 735 million yuan in the first three quarters, an increase of 14.78% over the same period last year; net profit of 39.49 million yuan, an increase of 51.35% over the same period last year, deducting 38.72 million yuan of non-net profit, an increase of 60.72% over the same period last year. The company's revenue continued to grow, and its profitability increased significantly, exceeding expectations. And the company to strengthen R & D investment, mainly invested in R & D personnel salaries, R & D costs 20.05 million, an increase of 76.13% over the same period last year. The company is the leading integrated service of electronic measuring instruments in China. Huawei Hayes Semiconductor is the top five customers of the company. the recent official launch of 5G commercial has promoted a broad future for the company.
Main points of investment:
The net profit rose sharply, and the profitability improved significantly: in the first three quarters, the operating income was 735 million yuan, an increase of 14.78% over the same period last year; the net profit returned to the mother was 39.49 million yuan, an increase of 51.35% over the same period last year, deducting 38.72 million yuan from non-net profit, an increase of 60.72% over the same period last year. Operating costs in the first three quarters were 590 million, up 11.6 per cent from a year earlier, lower than the 14.8 per cent growth in operating income, resulting in a 2.3 per cent rise in gross profit margin. During the period, the expense rate is about 12%, which has not changed much from the same period last year. It can be seen that the cost of the company is reduced, the cost control is optimized, and the profitability is significantly increased.
The salary of R & D personnel has increased, and R & D investment has been strengthened: in the first three quarters of 2019, the company invested 20.05 million yuan in R & D, an increase of 76.13% over the same period last year. Under the emerging 5G standard, the testing architecture is required to be more flexible, the testing speed is faster, the technical complexity of testing requirements is increased, and enterprises invest more in R & D and testing. By strengthening the R & D investment, the company can give full play to the advantages of enterprises of the Chinese Academy of Sciences and listed companies, and provide customers with domestic leading testing technology and science and technology services.
The market space of communication testing industry is broad, and the income of leading enterprises is obvious: the benefit of communication testing in 5G development is much higher than that in 3G/4G era. Dongfang Zhongke is a domestic manufacturer engaged in instrument sales, instrument leasing and system integration business. 5G will be the infrastructure of the future, and communication testing is the rigid requirement of this process, which is bound to benefit for a long time. The market space of the communication testing industry in the 5G era will grow in volume, and the leading enterprises will obviously benefit. We believe that the company's position as the leader of the A-share testing industry in the 5G era has not changed.
Profit forecast and investment advice: from 2019 to 2021, the company is expected to achieve net profit of 84 million, 132 million and 234 million respectively, corresponding to EPS of 0.53,0.84,1.49 yuan respectively; corresponding to the current stock price PE of 38 times, 24 times and 14 times respectively; we maintain the "buy" rating of the company.
Risk factors: 5G construction is not up to expectations, country risk, Sino-US trade friction intensified.