I. events

Huasu Media released its annual report in 2019: the company's operating income in 2019 was 3.711 billion yuan, up 7.99% from the same period last year; the net profit belonging to shareholders of listed companies was 646 million yuan, up 0.21% from the same period last year

Second, our analysis and judgment

The company is a leading new media and smart city operator in the industry, with full licenses for cable network and new media operation, expanding various businesses and steady development throughout the country, and constantly transforming and upgrading to intelligent radio and television integrated operators and digital brokerage service providers in recent years. Broad prospects.

(1) steady growth in performance and sound development of new media business

In 2019, the company achieved an increase in operating income and net profit in the same direction, with steady growth in performance, with operating income of 3.711 billion yuan, up 7.99% over the same period last year, and net profit income of 646 million yuan, up 0.21% from the same period last year. The main reason was that the company actively enhanced the competitiveness of the new media content platform, introducing more than 40,000 hours of content during the reporting period, signing contracts for more than 2000 movies and TV dramas and 113th files of variety shows with head features, more than 3000 hours of Hollywood content, good development of new media business such as IPTV and OTT, and gradually approaching the number of cable TV users. And the overall cash flow of the company is good and stable, and it is expected to maintain abundant and healthy cash flow in the future to help the development of the company.

(2) traditional business has been hit, and the construction of intelligent radio and television has been empowered.

In recent years, the traditional TV industry has been constantly impacted by new media, and the cable TV business has shown a downward trend. The company has begun to focus on the development of intelligent radio and television construction, and the proportion of traditional digital TV revenue has gradually decreased from 23.63% in 2016 to 17.00% in 2019, gradually getting rid of the dependence on traditional cable TV business. During the epidemic, the "Smart Campus" online education classroom launched by the company supports the Bureau of Education to carry out distance online teaching, introducing educational brand content for more than 6000 hours to help students study at home; the company's participation in the "urban brain" assists relevant departments to hold platform-wide cloud recruitment, publicize relevant local support policies, and actively help cities resume work and production. The company joins hands with Hangzhou education and smart medicine to create new core applications such as shared classrooms for users.

(3) benefiting from 5G + UHD, the large screen scene continues to advance.

With the gradual progress of the 5G cooperation between the national network and radio and television, and the continuous improvement of the ultra-high definition industry in the equipment side and content side, the big screen ecology has benefited obviously. According to the "Super High Please Video Industry Development Action Plan (2019-2022)" jointly issued by the Ministry of Industry and Information Technology and relevant departments.

It is predicted that the overall scale of China's ultra-high definition industry will exceed 4 trillion yuan in 2020. In recent years, the company has deeply ploughed the development of the large screen industry, not only expanding the vertical field in many directions in the large screen content plate, opening e-sports, pets, children and other channels, and jointly with local operators to build advertising operation alliances to fully transform resources. and deepen cooperation with the head company, the value of the big screen is expected to increase. In 2020, the company will continue to accelerate the upgrading of the new infrastructure network and complete the construction of the 5G pilot network and the infinite wide area Internet of things in Hangzhou.

III. Investment suggestions

Benefiting from the 5G + UHD video dividend, the company also has the advantage of scarce license plates in the industry, and is optimistic about the long-term strategic development of the company in the future. It is estimated that the net profit of the company belonging to the shareholders of the listed company in 20 and 21 is 702 million yuan / 762 million yuan respectively, an increase of 8.67% and 8.55% compared with the same period last year. The corresponding EPS is 0.49 and 0.53 respectively, and the corresponding PE is 20x/19x.

IV. Risk hints

The risk of intensified market competition, the risk of changes in policy regulation, the risk of the impact of the epidemic situation, the risk of transmission security, the risk of the loss of cable users, and so on.