Donghua Software (002065): Goodwill impairment releases potential risks Core profit growth basically meets market expectations

Donghua Software (002065): Goodwill impairment releases potential risks Core profit growth basically meets market expectations

The company warns of the risk of goodwill impairment. It is expected that the profit will fall by 26% -13%. The company issued a 2019 annual performance forecast, and it is expected that the net profit of the mother will be 6 in 2019.

0-7.

0 billion, a year-on-year decrease of 26% -13%.

The company judges that there may be impairment of relevant goodwill arising from the acquisition of assets, and it is expected to make provision for impairment of goodwill3.

0-4.

0 million.

The company’s performance forecast is slightly lower than our 2019 profit forecast (7.

5.3 billion), significantly lower than the consensus expectation of the Wonder Market (10.

1.6 billion); after adding back the provision for impairment of goodwill, it basically met market consensus expectations.

After paying attention to the points and adding back the provision for impairment of goodwill, the expected profit is 失败:重查 expected9.

0-11.

0 million.

After the addition, the company expects that the net profit in 2019 will increase by 14% -39% per year, which is gradually increasing.

Looking back, we are optimistic about the growth prospects of the company’s software integration business in the medical, smart city and other sectors, and it is expected to become the gradual implementation of the new listing and spin-off regulations. Each business sector can obtain better incentives through the spin-off and revitalize the company’s existing assets.

Work with Huawei to create a new chapter in development.

The company continues to strengthen cooperation with Huawei in multiple business fields such as medical care, finance, and public utilities. In October 2019, Donghua and Huawei jointly released a user portrait system and intelligent data 合肥夜网 connection platform based on Kunpeng Financial’s big data solution.

The company is one of the eight system integration manufacturers with super-level qualifications in the country. We believe that the company can deeply participate in and benefit from the wave of domestic information technology innovation.

The prosperity of medical IT policy is sustainable, and the medical sector continues to be beautiful.

Favorable policies in the medical IT field have continued since 2018.Donghua Medical, a subsidiary of the company, is a high-end customer with more than 500 tertiary hospitals, and has continued to harvest large-scale orders from Nanfang Hospital, Zhumadian Central Hospital, and Affiliated Hospital of Southwest Medical University since 2019.We believe that the high prosperity of the industry is sustainable.

Estimates and recommendations take into account the company’s provision for impairment of goodwill3.

0-4.

0 million, we lowered our net profit for 2019 by 18.

8% to 6.

2.5 billion; Considering the favorable policies and the company’s performance after accumulating goodwill impairment provisions basically meet market expectations, we slightly increase the net profit in 20203.

9% to 9.

04 ppm, dated 2121 revenue forecast 121.

72 ppm, an increase of 10 in ten years.

0%; net profit forecast 10.

41 ppm, an increase of 15 in ten years.

2%; Maintain “Outperform” rating and raise target price by 37.

5% to 11 yuan, mainly due to switching to 2020 evaluation.

Our target price is based on 38 2020 price-earnings ratio, corresponding to 55/33 times the 2019/21 price-earnings ratio, which is 1 compared with the year before.

6% upside.

The current contradiction corresponds to a price-earnings ratio of 54 in 2019/20.

4/37.

6 times.

Risks Goodwill impairment risks, policy benefits exceed expectations, and R & D expenses exceed expectations.