Dahua Co. (002236): 18-year performance is in line with expectations, comprehensively promote smart transformation of products and solutions, continue to recommend

Event: The company’s 18-year performance is in line with expectations. The company’s 18-year full-year revenue is 236.

6.6 billion, an annual increase of 25.

58%; net profit attributable to mother 25.

2.9 billion, a ten-year growth of 6.

34%, in line with expectations.

Among them, 18Q4 single-quarter revenue of 86.

3.5 billion, an annual increase of 21.

26%; net profit attributable to mother 9.

6.6 billion, an annual increase of 3.

42%.

Against the background of the overall weak security demand in 18 years, the company’s revenue still maintained 25% + growth, which is not easy.

Opinions: I. The growth rate of the short-term security industry is expected to return to high growth in the medium and long term. At present, Dahua’s solutions and product revenue are about 5: 4, and domestic and overseas revenue is about 6: 4.

Among them, programs are mainly domestic, accounting for about 80%; overseas are basically products.

Affected by domestic economic deleveraging and overseas trade frictions, the growth rate of the security industry has improved for 18 years, but overall growth has continued to grow.

At present, the security demand is mainly delayed by internal uncertainties, but it still exists for a long time. The trend of transforming artificial intelligence and smart cities has also opened up the incremental space.

In the medium and long term, the company is expected to return to high growth, mainly including: 1) Solution market: Domestic PPP storage standards are standardized to drive performance improvement of the solution business door, and PPP is picking up. As a leader in security solutions, Dahua is expected to take the lead to benefit;The project demonstration is expected to continue to break through.

2) Product market: domestic channels sink to county villages; increase the coverage of programs and product lines in non-US regions overseas.

Second, the weak demand for the program affects the gross profit margin, increasing the company’s 18-year comprehensive gross profit margin for research and development and capital expenditures is 37.

16%, an annual decrease of 1.

07 averages.

Specifically, the gross profit margin of the scheme business is 41.

01%, an annual decrease of 2.

15 units, product business gross margin 37.

22%, maintaining stability, weak domestic market 北京spa会所 demand for the solution dragged down the overall gross profit margin.

Net profit increased by 10.

96%, an annual decrease of 1.

65 averages, ROE is 22.

16%, a decrease of 3.

31 units.

In terms of costs, R & D costs are 22.

840,000 yuan, an increase of 27 in ten years.

67%, continue to vigorously develop; financial expenses are -1.

23 ppm, a reduction of 173 per year.

56%, exchange gains brought about more than 200 million yuan.

Net operating cash flow increases by 4 per year.

49%, the business scale expanded, operating cash payments increased.

Capital expenditure is about 5.

5.2 billion, an annual increase of 91.84%, increase spending, Dahua Smart Industrial Park, smart security production base and other projects are under construction.

In terms of operations, accounts receivable + notes are about 深圳桑拿网 125.

7.7 billion, an increase of 26 in ten years.

13%, basic health; inventory increased by 8.
.

18%; accounts receivable and inventory turnover rate slightly increased, operating steadily.

Third, industry fluctuations do not change the long-term growth logic. AI drives product and solution capabilities to rise together. Macro factors short-term disturbances do not change long-term downstream security requirements, and there is huge room for growth.

Dahua upgraded from traditional video surveillance to smart IoT solution and operation service provider, and the market space increased to 700 billion US dollars +.

The company’s scale grabs / maintains market share, continues to continue to expand, accelerates AI landing on products, and transforms customer demand for innovation in front-end, storage, and center business; on the solution, it combines cloud computing and big data to enable smart transformation of cities and industries.

Intelligence has been initially applied. It is expected that penetration will accelerate significantly, increasing the added value of products and solutions, and driving the company’s profitability.

As one of the security leaders, Dahua has obvious business advantages in its solutions, and its long-term growth logic is clear. It continues to be optimistic.

Fourth, continue to recommend, maintain the “Buy” rating is expected to return to mother net profit for 2019-2021 is 29.

8/37.

5/47.

30,000 yuan, EPS is 0.

99/1.

25/1.

58 yuan, corresponding to PE is 18/14 / 11X, with a 6-month target price of 24 at 25xPE in 2019.

8 yuan, maintain “Buy” rating.

Risks indicate the impact of macroeconomic fluctuations; the risk of global trade friction; changes in industry policies, etc., which cause product sales and solution market development to fall short of expectations;