Huati Technology (603679) Company Comments: Steady increase in first half performance and plans to issue convertible bonds to help implement projects

Huati Technology (603679) Company Comments: Steady increase in first half performance and plans to issue convertible bonds to help implement projects

The performance of the first half of 19 years has steadily increased, and the growth rate is expected to pick up in the second half of the year. The company announced the announcement of the 2019 semi-annual results pre-increasing announcement. The company expects that the net profit attributable to shareholders of listed companies will be zero from January to June 2019.

48 to 0.

55 trillion, an annual increase of 50% to 72%, the median growth rate of 61%, an increase of 102 quarters earlier.

The growth rate of 28% has declined. It is initially that the company’s newly signed projects with high gross margins in Lijiang and other places entered the construction phase in the first quarter. The growth rate in the first quarter significantly increased, and the R & D expenditure for new products also increased.

However, for the company’s early deployment of smart street light projects, complete categories, and strong design and research and development capabilities, the current high-margin smart street light-related orders in hand are plentiful, and successively won orders from Lijiang, Chengdu Shuangliu District, Chengdu Ring City Ecological District Restoration Project, etc.Reached a strategic cooperation agreement on smart street lights with Renshou County of Meishan City.

The company’s performance growth rate is expected to pick up again in the second half of the year.

The company intends to issue 2.

300 million convertible bonds, to supplement the working capital to ensure that the project implementation company announced on July 3 that it is planned to issue no more than 2.

US $ 300 million convertible corporate bonds to raise funds for the Chengdu Jincheng Smart Greenway Project.

The total investment required for this project is 3.

Since the bidder is responsible for the preliminary construction of the Chengdu Smart Greenway Project, the amount of USD 9.5 billion will be repurchased by Chengdu Tianfu Greenway Construction Investment Co., Ltd. in five phases within 4 years, which puts forward many requirements for the bidder’s initial capital investment.

For example, the smooth issuance of convertible bonds can supplement the company’s working capital, improve the company’s overall cash flow structure, effectively reduce the company’s funding pressure, and ensure the smooth implementation of the project.

The implementation of the project is conducive to the company’s deep participation in the construction and investment in the field of smart cities, and has a positive role in promoting the company’s development strategy.

Reorganization of the company’s existing assets and liabilities30.

33%, after the raised funds are in place, assuming bondholders exercise conversion rights, the company’s capital will be enriched, the company’s net assets will increase accordingly, the asset-liability ratio will decrease, and the asset-liability ratio is expected to drop to about 25%.

Focus on smart streetlights and have a first-mover advantage in the field of 5G site resource operation. On June 6, the Ministry of Industry and Information Technology distributed 5G commercial licenses to China Telecom, China Mobile, China Unicom, and China Radio and Television. This is an important step in 5G commercial promotion.

With the advent of the 5G era, high-frequency ultra-dense 南宁桑拿 networking will inevitably generate demand for small base stations, which will promote the construction of small base stations. The installation of small base stations on smart street lights will be one of the most feasible ways. Therefore, the arrival of 5G will soonGenerated a large demand for smart street lights.

The company reached a strategic cooperation agreement on smart street lights with Renshou County of Meishan City. The project plans to build 20,000 sets of smart street lights with a total investment of about 600 million yuan.

The company has joined Huawei’s eLTE ecosystem and has cooperated with Tencent Cloud, Tower, Inspur Software and other companies to jointly promote the construction of 5G Internet of Things wisdom.

With the acceleration of 5G commercialization, the company is expected to benefit significantly from it.

Investment recommendations The performance of the first half of 19 was lower than expected, but there were plenty of orders in hand, and the growth rate of the second half of the year promoted the rebound.

The company intends to issue 2.

The 300 million convertible bonds are mainly used for project construction investment to ensure the smooth implementation of the Chengdu Jincheng Smart Greenway Project.

With the accelerated commercialization of 5G, the company is expected to achieve higher returns from smart street light products and project operations.

In summary, we maintain our “Buy” rating on the company.

Temporarily maintain the company’s net profit for 2019-2021.

60/2.

43/3.

27 trillion, corresponding to 26, 17, 13 times.

Risk Warning: Expected Investment Growth Exceeds Expected Downward, Smart Street Light Business Growth Is Less Than Expected

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