China Satcom (601698) 2019 Interim Report Review: The world’s sixth largest fixed satellite communications operator’s operating income grows steadily

Event: On August 27, the company announced its 2019 semi-annual report, with revenue for 2019H113.

120,000 yuan (+2.

05%), net profit attributable to mother 2.

08 thousand yuan (+24.

34%), with a gross profit margin of 40.

19% (-3.

50pcts) and a net profit of 27.

59% (+7.

55pcts).

  Key points of investment The company’s revenue has maintained a steady growth, and its operating costs have risen rapidly in 2019H1. Affected by the company’s increased use of new territorial customers and some internal customers, its operating income was 13.

120,000 yuan (+2.

05%), maintaining steady growth.

Among them, the company’s main business satellite space segment operation and related application services business realized operating income12.

6.5 billion (+2.

13%), accounting for 96% of the company’s total operating income.

34% is the company’s main source of income.

The company’s net profit attributable to the parent in 2019H1 is 2.

08 thousand yuan (+24.

34%), the earlier operating income maintained a faster growth, we believe that the 2018H1 company accounted for the asset impairment loss caused by the Asia-Pacific Satellite 6 due to failure (1.

2.2 billion) impact.

  2019H1 company operating cost is 7.

8.5 billion (+8.

39%), leading to an increase in operating income, leading to the company’s current gross profit margin (40.

19%, -3.

(50 pcts) appeared to be tilted, which ultimately was the impact of the company ‘s newly launched Asia-Pacific 5C and Asia-Pacific 6C satellites in 2018, including the increased depreciation, measurement and control fees, and operating expenses.

  At the same time, the company’s three fee growth rate exceeded the growth rate of operating income and sales expenses (0.

2.5 billion, +24.

15%) growth is basically to supplement satellite business promotion, increase exhibition promotion, sales service fees, etc .; management costs (0.

890,000 yuan, + 16.

29%) growth is expected to increase personnel 杭州桑拿 costs for business development, while increasing labor costs, while increasing depreciation, office expenses, etc .; financial expenses (-0.

07 billion, +81.

(70%) growth is expected to reduce interest income, and at the same time as the interest rate on borrowings is no longer capitalized, the increase in interest expenses is affected.

In addition, due to the fact that the current part of the contract does not reach the collection period, the company’s balance of accounts receivable at the end of the reporting period (6.

2 billion yuan, +111.

10%) increased compared with the end of the previous period, cash flow from operating activities (6.

480,000 yuan, -20.

(97%) decreased. As the company’s customers are mainly government agencies or large enterprises, we expect that the contract collection period will expire 武汉夜网论坛 in the future, and the company’s balance of accounts receivable and cash flow from operating activities will improve.

  China Aerospace Science and Technology Corporation is a holding company, and the world ‘s sixth largest fixed communications satellite operator company is a core enterprise in the military satellite operation service industry of China Aerospace Science and Technology Corporation. It has a national basic telecommunications business license and a value-added telecommunications business license.Some of the only satellite communications operating companies that have communications satellite resources and are autonomously controllable (Asia-Pacific Satellite, a Hong Kong-listed company, is a company-controlled subsidiary), are listed as national first-class emergency communications professional security teams.The company’s main business is satellite space segment operation and related application services, mainly satellite communication broadcasting.

  Through investment, construction and operation of communication and broadcasting satellites and supporting ground measurement and control and monitoring systems, the company provides users with radio and television, communications, video, data and other transmission services.

China Satellite Communications has built a complete satellite space segment operation system.In 2019H1, the satellite 6C satellite was successfully launched and transmitted. The contract was renewed in June 2019. The company operates and manages 16 commercial communications broadcast satellites and owns transponder throughput.Quantitative resources cover C wavelength, Ku vibration and Ka vertical, etc. Satellite communication broadcast signals cover the whole of China, the Americas, Southeast Asia, South Asia, the Middle East, Europe, Africa and other regions. It is the second largest in Asia and the sixth largest in the world.Operator.
  In terms of satellite space segment operations, the company’s internal radio and television business and communications business have developed steadily. At the same time, it has actively expanded overseas markets and opened up users in emerging markets outside of various fields. In terms of satellite application services, the number of users of the company’s shipborne communications platform has steadily increased and was approvedThe Zhejiang Smart Ocean Project has achieved substantial breakthroughs in the operation and maintenance of police emergency satellite communication systems and fire emergency response. In terms of broadband application business, the number of users of the company’s telecommunication-grade high-throughput satellite Internet business has increased, and officially released among themThe first Ka terminal enterprise standard, which standardized Ka high-throughput satellite access technology standards.

Aviation satellite Internet, shipborne satellite Internet, distance education, government and enterprise private networks, 4G base station backhaul, Internet live broadcast and other applications proceed as expected.

  According to data released by Euroconsult in 2018, the global satellite communications market is generally stable. By 2017, more than 40 global fixed communications satellite operators had a total operating income of $ 11.5 billion. It is estimated that the global satellite transponder rental capacity is expected to reach 969 by 2022.

8GHz, an increase of 111 compared to 2017.

84%, with an average annual compound strength of 16.

20%.

We believe that, in this context, the company, as the only domestic satellite communications operation enterprise with communications satellite resources and independent control, has a broad market space.

  On August 23, 2019, the company announced that the company’s satellite, Zhongxing 18, which had been launched on August 19 after the successful separation of Xingjian, had an abnormal operation and is currently troubleshooting.

The company invested 15 in the Zhongxing 18 satellite project.

1.8 billion, of which 10.

57 trillion intends to use this listing to raise funds.

The company disclosed that the project has been underwritten by the People’s Property and Casualty Insurance Company of China, and the insurance coverage can cover the investment amount of the project. At the same time, the current situation of Zhongxing 18 will not affect the company’s current orbit satellite operations and daily business operations.The current situation of No. 18 will not have a significant impact on the company’s future performance, but if the failure cannot be repaired, it may delay the company’s development of satellite communications business. It is recommended that follow-up attention be paid to the troubleshooting of Zhongxing No. 18 satellite.

  Investment suggestion We believe that as the world’s sixth largest fixed communications satellite operator, the company relies on its satellite resource advantages and technical competitiveness in the domestic satellite communications industry to promote the company to become a leader in the domestic satellite communications industry; the company currentlyThe complete satellite space operation system has been improved, and the number of internal users has maintained steady growth. At the same time, actively expanding overseas users is conducive to the growth of the company’s future revenue scale. The satellite of Zhongxing 18 currently fails, but the insurance amount of this project can cover the project investment.Amount, but if the failure of Zhongxing 18 satellite cannot be repaired, it will adversely affect the development process of the company’s satellite communications business. It is recommended to keep an eye on it.

  Based on the above perspectives, we expect the company’s operating income for 2019-2021 to be 28.

3.4 billion, 30.

67 ppm and 34.

4.3 billion, net profit attributable to mothers was 4.

5.4 billion, 5.

02 ppm and 5.

87 trillion, EPS is 0.

11 yuan, 0.

13 yuan and 0.

15 yuan, currently sustainable corresponding to 89 times, 75 times and 65 times PE.

  Risk Warning: There is a risk of satellite launch failure; there is a risk of failure of satellites in orbit; the development of the internal satellite communications market is less than expected.