*ST Gaosheng (000971): Half Year Net Profit Decreased 73.03% To 7 Million 579 Thousand And 700 Yuan.

*ST 000971.SZ released its semi annual report in 2019, operating income of 425 million yuan, an increase of 0.60% over the same period last year. Net profit attributable to shareholders of listed companies was 7 million 579 thousand and 700 yuan, down 73.03% compared to the same period last year. Net profit attributable to shareholders of listed companies after deducting non recurring gains and losses was 34 million 323 thousand and 500 yuan, an increase of 25.01% over the same period last year; and the basic earnings per share were 0.007 yuan.

During the reporting period, the IDC industry has gradually developed to a large scale and centralization. Domestic telecom operators step up the intensive marketing management of key customers, and face the end customers' unified negotiation, which makes some customers and businesses of IDC service providers run off. The IDC cloud process is accelerating. Under the pressure of strong prices and brands of cloud makers, some of the price sensitive customers choose cloud services. The traditional IDC customer resources have shrunk dramatically and gross margins have continued to slide. During the reporting period, the IDC business revenue of the company was 198 million yuan, a year-on-year decrease of 18.88%, gross profit of 8 million 276 thousand and 500 yuan, a decrease of 69.90% compared with the same period last year, and IDC business revenue growth and gross margin were at a relatively low level, and the market share and competitiveness were not strong.

During the reporting period, in order to adapt to the increasingly fierce market competition under the influence of the "low speed and low fee" policy environment, Ying Yue of Shanghai lowered the unit price of sales, resulting in a decrease in the revenue of some large clients. During the reporting period, the VPN business of the company achieved operating income of 115 million yuan, an increase of 10.71% over the same period last year, and gross profit of 42 million 373 thousand yuan, a decrease of 10.93% compared to the same period last year. The main cost of Shanghai Ying Yue is behalf maintenance expenses, depreciation and staff salaries. Because of the fierce market competition and more sophisticated services, the investment has been increased to achieve the forecast of revenue scale and expand market share. The cost and expenses have increased compared with the same period in 2018.

Cloud computing vendors quickly penetrate the CDN market through price war, and many enterprises have been granted CDN licenses, and CDN market competition has become more intense. Affected by the irrational price war and monopoly effect of the Internet industry giants, the market share of Gaosheng technology CDN has been greatly reduced, coupled with the purchase of more CDN business equipment in the early stage, the business shrinkage has led to low utilization of equipment, increased depreciation cost of equipment units, greatly reduced customer reuse rate, and significantly reduced gross margin. The above reasons resulted in a loss in the CDN business during the reporting period, and the CDN business revenue of the company was 13 million 47 thousand and 400 yuan, a decrease of 65.39% compared with the same period last year. Gross profit -478.62 million yuan, a decrease of 2 million 13 thousand yuan compared with the same period in 2018.