Overview of events

According to the company's third-quarter report, the company achieved operating income of 410 million yuan in the first three quarters of 2020, an increase of 37.77% over the same period last year. The net profit was 88.2786 million yuan, up 107.76% over the same period last year; the net profit after deducting non-return was 75.1395 million yuan, an increase of 72.40% over the same period last year; and the net cash outflow from operating activities was 116 million yuan.

Analysis and judgment:

Smart environmental protection is the main source of revenue for the company, but also for the smart city business diversion, the company's performance doubled in the first three quarters compared with the same period last year. The growth rate of smart city business is obvious, and the net profit in 2020 is expected to increase significantly compared with the same period last year. The growth rate of profit caliber is significantly higher than that of revenue caliber, which is mainly due to the increase in gross profit margin and the sharp increase in investment income and non-operating income. 1) the company's intelligent environmental protection business focuses on data operation analysis, and assists government customer-oriented decision-making by providing multi-scene and multi-source data services and dynamic management and control. Because the environmental protection data is externalized naturally, and the solution of environmental protection problems involves many departments such as environmental protection, housing construction, transportation and sanitation, the company chooses intelligent environmental protection as the flow entrance. and then gradually achieve the goal of extending from smart environmental protection to smart city. 2) the operating income in the first three quarters of 2020 was 410 million yuan, an increase of 37.77% over the same period last year, mainly due to the growth of smart environmental protection business. The net profit of returning home in the first three quarters of 2020 was 88.2786 million yuan, an increase of 107.76 percent over the same period last year and 27.37 percent month-on-month. The main reason behind the high growth in Q3 performance is that the overall gross profit margin increased from 44.68 per cent in the same period last year in 2019 to 63.73 per cent in the first three quarters of 2020. In the first three quarters of 2020, the company achieved an investment income of 6.4336 million yuan, an increase of 2789.54% over the same period last year. Other income items increased by about $6 million over the same period last year, mainly due to VAT rebates received by companies. In addition, the company's non-operating income reached 1.561 billion yuan, an increase of 73.66% over the same period last year, which is also one of the main factors for the obvious improvement in profit caliber compared with the same period last year.

During this period, the expense rate is high, the production investment is expanded, the R & D team is strengthened, and remarkable progress has been made in the application of Internet of things technology in the two major fields of smart environmental protection and smart city, although the cost burden is increased during the short-term realization period, it will become an important support for the company's long-term development. The sales expenses in the first three quarters of 2020 were 25.713 million yuan, and the rate of sales expenses rose to 6.27 percent from 4.47 percent in 2019. It is mainly due to the increase of sales staff.

The management expenses in the first three quarters of 2020 were 40.4932 million yuan, and the rate of management expenses rose to 9.88 percent from 9.11 percent in 2019. The R & D expenditure in the first three quarters of 2020 was 45.1525 million yuan, and the R & D expenditure rate increased from 9.12% in 2019 to 11.02%, mainly due to the increase in R & D personnel.

The epidemic accelerated the monitoring of the Internet of things and the release of big data's decision support market. Jiahua Technology significantly benefited from the couplet market dividend by strengthening the patented technology in the field of pollution source monitoring and forecasting, ramming the physical networking PASS and SAAS platform. (1) the impact of the epidemic is good for the release of full-process business opportunities from the data collection side to the decision-making side of the Internet of things. Before the epidemic, government departments could monitor and control pollution sources offline. The impact of the epidemic led to more urgent needs of government departments for environmental protection data collection based on the Internet of things, and obvious business opportunities were released. (2) the research and development aims at the intelligent monitoring method based on the target of pollution source, and it is expected to implement service operation in multi-environmental protection scene in the future. We have noticed that among the newly applied invention patents in the first half of this year,, An intelligent detection method for pyrotechnic dust and an intelligent detection method for river garbage identification are patents in the field of pollution source monitoring. In addition, the company also constructs a patent system for forecasting methods and creates data-based operational closed loops, such as "an air pollutant concentration prediction method based on nonlinear correlation analysis and deep learning" and "an air pollutant concentration online prediction method based on Gaussian regression" applied for in the first half of this year. (3) Shanxi Provincial Local Standard DB14/T2009-2020 "Technical Specification for gridding Monitoring of Air quality" was issued on February 28, 2020 and formally implemented on May 28, 2020. The company has obtained 2 patents for "virtual and real testing system of a mechanical device" and "data sharing method, device, data sharing platform and electronic equipment", and applied for 8 new invention patents. 13 software copyrights such as soil environment analysis, water environment analysis, motor vehicle exhaust and automobile intelligent health climate control system have been obtained, and 5 software copyrights are under application. Two utility models of multi-function portable vehicle air quality detector and expandable integrated design for good monitoring devices were obtained, and one utility model under application marked a further verticalization of the company's core technology in smart environmental protection and smart city, and further consolidated the PAAS platform and SAAS application platform of Internet of things application.

Investment suggestion

The environment-friendly Internet of things and big data market are expected to maintain a high boom. Based on the company's good development trend and more active business strategy, we maintain our original revenue and profit forecasts. It is estimated that the revenue from 2020 to 2022 will be 7.98 million yuan, 11.73 billion yuan, respectively, with a compound growth rate of 49.96% in the next three years. It is estimated that the net profit of homing from 2020 to 2022 will be RMB 1.98 million, respectively, with a compound growth rate of 61.57% in the next three years. Give the company 60 times the 2020 homing net profit valuation, maintain the target price of 153.6 yuan, and maintain the buy rating.

Risk hint

Internet of things new technology research and development and new product development risk, business risk, industry risk, macroeconomic risk, fund-raising investment project implementation risk, systemic risk and so on.