Great Wall of China (000066) 2019 Interim Report Review-Second quarter deducts non-net profit

The company is the core hardware platform of China Electronics’ independent security, and its business covers the independent and controllable entire industry chain from chips to complete machines.

The company’s performance ushered in an inflection point in the second quarter. The sales revenue and contract value of the independent security business increased by multiples. Tianjin Feiteng’s acquisition target has passed the board of directors. We expect the company’s importance in the independent security market will further increase.

The company’s 2019 Interim Report: operating income of 43.

300 million, +4.

67%; net profit attributable to mother 1.

430,000 yuan, -42.

82%; the net profit after deducting non-attribution to mothers was 74.63 million yuan, and at the end of last year was 9.7 million yuan.

Results in the second quarter improved markedly, gross profit margins increased, and R & D investment increased.

In Q2, it achieved operating income of 24 in a single quarter.

100 million, +9.

18%; net profit attributable to mother, RMB 91.53 million, -7.

83%; deduct non-attributed net profit1.

1.5 billion US dollars, last year’s budget of 2103 million, a year to reverse losses to profit.

The overall gross profit margin was 21.

38%, an increase of 4 percentage points, among which the gross profit margin of high-tech electronics and information security machines and solutions increased, driving the overall gross profit margin to increase, the current gross profit margin was 25.

44% / 29.

66%, an annual increase of 8.



Company R & D funding3.

600 million, up from 39 previously.


The demand for autonomous security business has accelerated significantly, with sales revenue and contract value multiplying.

Revenue is mainly composed of high-tech electronics / information security equipment and solutions / power products / parks and property services, which contribute revenue13 respectively.




32 trillion, previous change of -9.

22% / 42.

41% / 6.

89% / 6.


Encore’s business needs have accelerated significantly.

In terms of safety equipment, the company’s procurement volume increased.

The company’s related transaction amount with chip supplier Tianjin Feiteng was 55.98 million yuan, and the ranking of 26.24 million yuan accumulated last year has significantly improved.

The company and the operating system supplier Tianjin Kirin’s purchase of goods and services related transactions amounted to nearly 2 million yuan, compared with the same period last year has also significantly increased.

The company’s network security and informatization business has made significant progress. The sales revenue of independent security business has achieved several-fold growth in market contracts. The complete product based on the PK system has the largest share in a key upgrade and replacement project in the country.Internet, finance, public security and other key industries have won orders and created typical cases that can be promoted.

The company’s proposed acquisition of a 35% stake in Tianjin Feiteng has passed the board of directors and looks forward to the subsequent progress of the independent security business. The company intends to acquire Tianjin Feiteng 13 from Huada Semiconductor and China Zhenhua respectively.

54% equity and 21.

46% equity and signed the corresponding “equity 重庆耍耍网 transfer contract”, the transfer price is set to 1 respectively.

17 and 1.

85 million, corresponding to a voting right ratio of 26.


After the acquisition is completed, the company will hold a 35% stake in Tianjin Feiteng.

The other two shareholders, Tianjin Binhai New Area Military-civilian Integration Innovation Research Institute and Tianjin Binhai New Area Financial Investment Group Co., Ltd. each hold Tianjin Feiteng 33.

33%, 31.


We believe that the company has a clear competitive advantage in autonomous security business, and the demand for replacement of the whole product in the party and government and industry has increased, and the company’s business has maintained rapid development.

With the completion of the Tianjin Feiteng acquisition, the company will switch from a complete machine supplier to a core hardware provider, and a part of the industry will be further improved.

Risk factors: the uncertainty of foreign investment; the progress of safe and reliable business is not up to expectations; the integration progress of the acquisition target is gradually expected.

Investment advice: Maintain EPS forecast for 2019-2021 of zero.



48 yuan, corresponding to 26/23/20 times of 2019-21 surplus, maintain “overweight” rating.