Time Intercon (01729) Performance Analysis (2) – Performance Review

Let me briefly talk about the interim results.

Revenue increased by 35% to 836 million yuan, gross profit increased by 29% to 184 million yuan, gross profit margin decreased slightly by 1% to 22.1%, net profit increased by 10.5% to 88.4 million yuan, but if one-time gains and losses were eliminated, core profit From 80 million yuan in the same period last year, the growth rate was 20% to 96 million yuan this year, and the core profit per share was as high as 5.2 cents.

This performance may be dissatisfied by investors, because the relationship between the issuance of new shares, although the net profit has increased, but the core earnings per share from 5.6 cents to 5.2 cents, a slight retrogression.

The income of the four major divisions recorded double-digit growth, especially for telecommunications and medical equipment, while the data center was still able to record moderate growth under the adverse economic and trade conditions of China and the United States.

The revenue of the telecommunications division increased by 113 million yuan, accounting for more than 50% of the overall revenue growth, mainly due to the shipment of new 5G products up to 170 million yuan, and the peak of 5G construction in the next few years, estimating the income of related products. It will continue to increase greatly. The main reason is that Huawei and ZTE, which was an important customer of the company, believe that they will order 5G related wire components from the company.

As for the data center segment with high gross profit margin and high profitability, Google, the main customer, continues to build data centers around the world, so even if there is a trade war, it is estimated that Google will not change suppliers at random, and Google’s orders are not paid at all. Shipped to the United States, but some are shipped to the Netherlands, so the trade war is influential, but the impact is not as big as we expected. I believe that as long as Google’s plans to expand its data center continue, the revenue and performance of this segment can be maintained and even continue to record moderate growth.

As for the biggest flaw in this performance, I believe that everyone will agree that administrative expenses have risen sharply. Through this performance and the previous annual results as of the end of March 2018, we can calculate that the administrative expenses in the second half of 2017/18 have started to rise, and the administrative expenses of this interim result have risen again. I estimate that there are three reasons. :

1. In order to cope with huge orders, the company should have been overloaded since the second half of last year. The situation in the first half of this year is even more serious. The utilization rate of production capacity is estimated to be far more than 100%. Therefore, the related staff costs and salaries have also risen sharply. Do you know how the capacity utilization rate has increased to more than 100%?

2. In August this year, nearly 89 million shares were granted to management and employees at a subscription price of 0.349 yuan per share. This option will be included as administrative expenses at the time of issue. 10,000 yuan;

3. After listing, you must pay domestic social security fees as required by the law. I have previously written about the issue of social security fees. Coincidentally, administrative expenses have started to rise in the second half of last year. It is estimated that this is due to the fact that after the listing, the social security expenses are paid according to the regulations. The giant of Yuan.

Another small flaw should be affected by the trade war. The income from the United States recorded a slight retrogression, but this is not a problem of the company itself. The crime of non-war can only be solved by the Sino-US trade reconciliation.

In the first half of this year, the core profit was about 96 million yuan. In fact, if the expenses of stock options are removed, the core profit may be as high as 100 million yuan, which is more than 20% higher than the core profit of 80 million yuan in the same period of last year. The performance is better than I originally expected. better. In the second half of the year, due to the Lunar New Year holiday, the profit is estimated to be lower than the first half of the year. I estimate that the core profit for the whole year is expected to reach 170 million yuan! The interim dividend is 1 sen per share, and the final dividend is generally higher than the interim dividend. It is estimated that the full-year dividend will be as high as 2-3 cents per share.

The final one will write a target valuation and outlook.