Fire Communication (600498): Short-term performance under pressure to accelerate 5G process brings new growth momentum

Investment Highlights: The company released the third quarter report of 2019.

The first three quarters achieved operating income of 177.

75 ppm, a ten-year increase2.

32%; net profit attributable to mother 6.

19 ppm, a decrease of 1 per year.

86%.

In the third quarter alone, operating income was 57.

90 trillion, down 6 a year.

28%; net profit attributable to mother 1.

92 ppm, an increase of 16 in ten years.

88%, performance was slightly lower than expected.

  The preliminary growth rate of revenue is expected to accelerate with the arrival of 5G construction.

The revenue forecast is currently in the overlapping period of 4G and 5G, and the scale bidding of 5G bearer network has not yet started.

Since the second half of the year, operators’ 5G investment has gradually accelerated. In the third quarter, the company has successively won bids for mobile 2019 25G passive WDM optical equipment, operators 100GDWDM / OTN equipment, and mobile GPON equipment acquisition services in 2020. The operator ‘s procurement requirements willDrive the company’s communication system business to gradually increase the volume, the future is still optimistic about the incremental space brought by 5G for communication equipment vendors.

  Cost reduction and cost efficiency continued to advance, and gross profit margin improved month-on-month.

Consolidate the advantages of R & D support technology.

The company’s period expense ratio continued to improve, and the sales expense ratio and management expense ratio in the single quarter decreased compared to the same period last year.

Single third quarter gross margin of 24.

78%, compared with 17 in the second quarter.

72%.

The company continues to develop R & D performance operators’ needs for network construction.

R & D expenditure for the quarter 7.

4.7 billion, a six-year growth of 6.

96%, company 10G rated G.

Metro’s fronthaul equipment passed the acceptance test of Unicom. The new OLT and ONU product functions were 杭州夜网 continuously optimized. The U3LA fiber passed the telecommunications and Unicom acquisition tests.

  Beacon Star is expected to provide the company with continued growth momentum.

Subsidiary Xinghuo Xingkong’s first half net profit1.

920,000 yuan, a high increase of 250 in ten years.

56%, outstanding performance.

The network visualization industry is showing rapid growth this year, and government police attach great importance to the construction of network security.

Comparable company Sino-Singapore’s 19Q3 revenue growth of 28.

51%, net profit attributable to mothers increases by 16.
.

52%, a ten-year high growth trend is obvious.

As a leader in the field of public security big data, Mars Sky continues to deepen its layout into vertical industries, which is expected to bring new growth points for the company.

  Revise down earnings forecasts and ratings.

Considering that the company’s third-quarter performance growth was slightly higher than expected, we lowered our profit forecast and supplemented our 21-year profit forecast. Before the revision, we expected the net profit in 19/20 to be 11.

5/15.
200 million. After the revision, we estimate that the net profit in 19/20/21 will be 9.
5/11.

5/13.

8 ‰, corresponding to the assessment of 32/27/22 times, downgraded from “buy” to “overweight”.

  Risk warning: 5G bearer network progress is not up to expectations.

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