Zhengtong Electronics (002197) Annual Report 2018 Review: IDC and Cloud Computing High-Growth Contracts Energy and Asset Impairment Slow Performance

Zhengtong Electronics (002197) Annual Report 2018 Review: IDC and Cloud Computing High-Growth Contracts Energy and Asset Impairment Slow Performance
In 2018, the company realized a revenue / net profit of 13.3 / -2.4 ‰, at least -20.8% /-659.7%, the profit is lower than disclosed in the Express Results.The high growth of IDC and cloud computing business, contract energy consumption, rising expense ratios and significant asset impairment dragged down performance.In the future, through the expansion of IDC cabinets and the increase of listing rates, performance is expected to bottom out and rebound.Maintain 2019/2020 EPS forecast of 0.32/0.47 yuan, plus 0 EPS forecast for 2021.58 yuan, maintaining 2019/2020 EBITDA forecast to 3.9/5.1 trillion and forecast an EBITDA of 5 in 2021.80,000 yuan, maintain “Buy” rating. IDC / cloud computing has experienced rapid growth, traditional business revenue has been extended, and contract energy has dragged down performance.Affected by the continued impact of Internet finance in 2018, financial electronics revenue4.100 million (-23.2%), gross margin of 18.8% (-1.26 cases); IDC operates, IDC / cloud computing revenue 3.5 billion (+61.66%), gross margin of 24.6% (+3.92 pcts); due to tight credit and changes in lighting engineering related policies, the company proactively strengthened project selection and risk control, and lighting electronics revenue2.800 million (-24.07%), gross margin of 23.5% (+1.40pcts), contract energy revenue is 0.900 million (-66.3%), gross margin of 15.3% (-28.90pcts).Contract energy revenues / gross margins fell far more than traditional businesses such as financial electronics / lighting electronics, which became an important drag on performance. Impairment of major assets erodes profits and strengthens risks to control operating cash flow.Company selling expenses in 20181.22 billion (-11.7%); management costs 0.9.9 billion (+19.3%); increase in short-term borrowings and loan interest rates, financial expenses 杭州桑拿 0.76 billion (+109.5%); increase the expansion of self-service terminals / smart POS / Zentong cloud and other fields, research and development costs 0.8.8 billion (+18.41%). Although the expense ratio has risen and eroded profits, asset impairment losses have been accrued.2.6 billion directly led to a major breakthrough.Of which bad debts 1.1.2 billion (0 in the previous period).52 ppm), mainly due to “de-leveraging” by local governments;1.4 billion (0 in the previous issue).16 ppm), mainly due to traditional business breakthroughs.Part of the reason for the significant asset impairment is that the company proactively strengthened its risk control and quick repayment, which also caused the company’s operating cash flow to be positive (0.2.4 billion, up from -7 in the previous period.2.5 billion). Operating lead bottomed 杭州桑拿网 out, and IDC’s outstanding earnings are imminent.After undergoing transformation in 2018, the company sorted out the three major business segments of financial electronics / lighting electronics / IDC. In the future, it will hope to strengthen risk control and technological innovation, and vigorously develop IDC / cloud computing. The current company 1.50,000 cabinets are deployed in the Guangdong-Hong Kong-Macao Greater Bay Area. At the end of 2017, 4,200 shelves were put on the shelves.8.5 billion), Changsha Mobile (1500 cabinets in 10 years 7).1.1 billion), Ping An Technology (2.62 billion cabinets, 2.6 billion in 10 years), substantially large long-term contracts.In the future, expansion of expansion cabinets / upgrading of shelves / optimization of customer structure, IDC business revenue / gross profit forecast will continue to rise, gradually becoming the company’s growth driver, driving the bottoming out of operating results. Risk factors: Expansion of IDC cabinets and increase of listing rate are lower than expected. Investment suggestion: Optimistic about the company’s bottoming out in the next three years and rapid growth of IDC business.We maintain our 2019/2020 EPS forecast at 0.32/0.47 yuan and predicts that EPS will be 0 in 2021.58 yuan, maintaining 2019/2020 EBITDA forecast to 3.9/5.1 trillion and forecast an EBITDA of 5 in 2021.80,000 yuan, maintain “Buy” rating.