Starnet Ruijie (002396): Performance in line with expectations Business development stable profitability improvement

Starnet Ruijie (002396): Performance in line with expectations Business development stable profitability improvement

Event: The company released the report for the third quarter of 2019 on October 29, and the company achieved operating income of 59 in the first three quarters.

9.3 billion, a decline of 3 every year.

1%, operating income of 26 in the third quarter.

6.7 billion, a decline of 0 every year.

06%; net profit attributable to mothers in the first three quarters4.

8 billion, an annual increase of 19.

3%, net profit attributable to mothers in the third quarter.

2.3 billion, an annual increase of 13.


Comments: 1. The performance is in line with expectations, the gross profit margin has increased, and the profitability has been further enhanced. According to the company announcement, the company ‘s net profit attributable to the mother in the first three quarters and single quarters is at the median level of performance forecast, and the performance is in line with expectations.

In the first three quarters, the company realized net profit deducted from non-attribution4.

3.4 billion, up 37 each year.

1%, net profit deducted from non-attributed mothers in the third quarter3.

1.5 billion, an increase of 18 per year.


The company’s average increase in net profit over the same period last year was mainly due to the company’s stable operation in the first three quarters of 2019, and continued expansion of smart networks, smart clouds, smart finance, smart communications, smart things, smart entertainment, smart communities and other businesses.R & D investment and market development efforts to optimize business layout and product sales structure.

In terms of gross profit margin, the company’s gross profit margin for the first three quarters was 37.

6%, an increase of 7 per year.

0 average, gross profit margin was 41 in the third quarter.

4%, an increase of 6 per year.

2 digits, an increase of 3 from the previous quarter.

0 mergers, the company’s profitability has been further enhanced.

2. The three expenses have increased, and the R & D has further increased, and the core competitiveness expenses have been gradually consolidated. The sales expenses in the first three quarters were 8.

5.7 billion, an annual increase of 13.

1%, sales expense ratio 14.

3%, an annual increase of 2.

0 totals, the overall level of selling expenses increased slightly; administrative expenses were 1.

7.6 billion, an increase of 21 every year.

4%, management expense ratio 2.

9%, increasing by 0 every year.

Six totals, the company’s overall management costs remained stable; financial costs were -0.

09 billion, down 52 every year.

6%, mainly due to the improvement of the exchange rate of RMB against the US dollar in the third quarter. The exchange income generated by 杭州龙凤桑拿网 US dollar assets during the reporting period was lower than the same period of the previous year. The financial expense ratio was -0.

2%, basically the same as last year.

R & D expenses7.

2.5 billion, an increase of 10 every year.

0%, mainly due to the company’s further increase in research and development investment, research and development expense ratio of 12.

1%, increase by 1 every year.Four single, the company continued to maintain a high proportion of research and development investment to improve the core technology competitiveness of the company’s products. In terms of development expenditure, the company’s development expenditure balance at the end of the third quarter was 1448.

30,000 yuan, down 31 from the beginning of the year.

7%, mainly because the capitalized R & D project in the internal 杭州桑拿网 research and development phase of the third quarter has been completed and carried over to intangible assets3. The cash flow pressure has penetrated. The company’s capital structure needs to be improved. From the perspective of the net operating cash flow, the company ‘sNet cash flow from operations in the third quarter was -2.

6.8 billion yuan, -0 in the same period last year.

5.2 billion, a year-on-year decrease of 415.

4%, of which the net operating cash flow contribution in the third quarter in a single quarter was 4.

6.9 billion yuan, compared with the same period last year 5.

8.1 billion, down 19.

3%, the company’s net cash flow from investment activities is -2.

$ 6.5 billion, an increase of 50 per year.


In the third quarterly report, the company pointed out that the investment income was 2574 compared with the same period of the previous year.

70,000 yuan, a decrease of 77 from the same period last year.

97%, mainly due to the loss of control of the company by other investors ‘value-added to Kemi in the same period last year, and the recognition of the gains from passive distribution of Kemi’s passive income and residual distribution at fair value, and this reportNo equity disposal business occurred during the period.

The net cash flow generated by the company’s financing activities was -3.

2 billion, a decrease of 123 every year.


4. Enterprise-level switches are forcing competitors to continue to benefit from Ruijie Networks, a subsidiary of Cloud Computing Development Corporation, is the second-tier leader in domestic enterprise-level switches, second only to Huawei and Xinhua III. According to the latest IDC report, Ruijie NetworksOf enterprise-class WLANs ranked third in the Chinese market, enterprise-class switches ranked fourth in the Chinese market, and routers ranked fifth in the Chinese enterprise network market.

In the first half of 2019, the company’s data center switches were widely used in Internet companies such as Alibaba, Tencent, Toutiao, and Meituan. At the same time, the company actively expanded overseas business and completed the establishment of a wholly-owned Japanese subsidiary.

Subsidiary Shengteng Information is the leading domestic slimming company. According to IDC data, the company’s slimming product implantation volume reached 67 in 2018.

90,000 units, accounting for 48 domestic market shares.

6%, ranked first in the Chinese market for 17 consecutive years, ranked No. 1 in the Asia-Pacific market (except Japan) for 7 consecutive years, and rose in the first half of 2019. The rising influence of the cloud desktop and smart terminal industries in the financial industry in the financial industry.The products were shortlisted in the six major state-controlled commercial banks, as well as many joint-stock banks and other commercial banks. The company’s cloud desktop product line channel construction has been continuously strengthened, and product sales have achieved breakthrough growth. In terms of new products, the launch of localization using Godson and ZhaoxinChip security and controllable domestic cloud desktop solution.

The cloud payment product line has seized the market opportunity of switching from traditional POS to smart POS. It has overtaken the curve and achieved leapfrog development. According to the 2018 POS volume report released by Nielsen, the company has leapt to the third largest POS supplier in the worldIn 2018, while maintaining the company’s leading position in the third-party payment market, major breakthroughs were achieved in UnionPay and the commercial bank market, and products achieved large-scale sales in internal national banks, achieving the dual footing of the commercial bank market and the third-party payment operator market.Dingli’s market structure. Each year, in the first half of 2019, the company’s holding subsidiary Kemi Networks has more than 85 million K-meter users. The three major business modules are smart KTV, entertainment value-added and advertising business showing a healthy development trend.

5. ICT technology integrators, underestimating second-tier leaders and maintaining the “strongly recommended-A” investment rating. The company is one of the few companies with comprehensive competitiveness in the domestic enterprise switch and enterprise WIFI fields. In China’s data centers, cloud computing has entered a high-speedUnder the background of the growth period, the company’s various ICT businesses have maintained steady growth.

The company’s major shareholders continued to increase their holdings, with both state-owned enterprise reform and the expected further integration of its subsidiary Ruijie Networks.

We expect the company’s net profit for 2019-2021 to be 6, respectively.

90 billion, 8.

04 billion and 9.

5.9 billion yuan, with EPS of 1.

18 yuan, 1.

38 yuan and 1.

64 yuan, the corresponding PE is 25.

7X, 22.

0X and 18.

5 times, maintain “strongly recommended-A” investment rating.

Risk warning: Subsidiary companies’ integration is worse than expected, industry competition is intensified, and gross profit margin continues to decline.