Vision China (000681) 2019 Interim Report Comment: Performance Affected by Regulation Is Less Than Expected to Improve in Second Half

Vision China (000681) 2019 Interim Report Comment: Performance Affected by Regulation Is Less Than Expected to Improve in Second Half
Core view In the first half of the year, affected by asset divestiture and regulatory factors, the company’s revenue and profit changes.However, the company’s image copyright business has expanded its competitive advantages. In the future, it will strengthen cooperation with major customers and commercial applications of AI image recognition.  Considering that the company is affected by regulatory policies and pressure from public opinion, the company is downgraded by 19?The 21-year EPS forecast is 0.46/0.53/0.59 yuan (the original forecast for 2019-21 was 0.58/0.74/0.91 yuan).The implementation of the company’s major customer strategy in the second half of the year is expected to improve performance and maintain the company’s “overweight” rating.   The company’s performance was worse than expected.Semi-annual company revenue in 20194.20,000 yuan, at least -16.49%; semi-annual revenue of the picture business 3.9.8 billion, previously unchanged; net profit attributable to mothers1.320,000 yuan, at least -2.2%.The lower-than-expected performance was mainly affected by asset divestiture and supervision.   Q2 supervision tended to cause serious increase in the company’s gross profit margin, 杭州桑拿 and the expense ratio remained stable during the period.The highest molecular weight of gross profit margin for the first half of 2019 is 63.11% (year-on-year.5pcts), Q2 single quarter gross margin decreased (60.29%, QoQ -7pcts), mainly due to the company’s enhanced picture content review in the second quarter, resulting in a decline in gross profit margin.In the reporting period, the sales expense ratio / management (including R & D) expense ratio / financial expense ratio were basically the same as the same period last year, which were 11 respectively.49% / 16.17% / 2.59%, twice -2.51 pcs / + 3.62 pcts / -0.77 points.   The gradual impact of regulation has gradually weakened, and deepening cooperation with major customers is expected to improve second-half performance.The state remains supportive of copyright protection and cracks down on illegal fines.After strengthening the content review, the company gradually corrected the influence of regulatory factors. Through industry research, the company’s business volume in June has basically remained the same as the same period last year.In the second half of the year, the company will focus on promoting major customer services and providing customized value-added services, including shooting, design, rights consulting, and other integrated marketing services.The company has signed strategic cooperation agreements with sustainable customers such as AVIC. It is expected that the performance will gradually improve in the second half of 19th.   Strengthen product standardization and AI promotion, and continue to develop Internet customers.The company further perfects the standardized content material product and price system, which is more in line with the budgets and needs of small and micro enterprises, self-media and other emerging market people.At the same time, the company focuses on increasing the research and development of Internet content trading platforms. Through artificial intelligence, big data, cloud computing, intelligent algorithms, the trading platform can provide customers with intelligent search and personalized recommendation services.It is expected that the company’s product standardization and intelligence will be improved, and Internet customer revenue is expected to increase.   Risk factors: New customer development is less than expected; major customer strategy is less than expected; technology research and development is less than expected.   Investment suggestion: The company is affected by regulation and there is pressure on business development. We lower the company’s EPS forecast for 2019-21 to 0.46/0.53/0.59 yuan (the original forecast for 2019-21 was 0.58/0.74/0.91 yuan).However, considering that the country will still strengthen the protection of intellectual property rights, pictures are expected to keep growing in the market, and the company has the advantage of content reserve and technology research and development in the field of picture citations. We maintain an “overweight” rating.

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