First coverage
Investment highlight
Covering Foreign Service Holdings (600662) for the first time to give a rating to outperform industry, with a target price of 7.50 yuan, the company has established core competitiveness in terms of business integration, layout breadth and customer resources. we believe that with the digital transformation, capital expansion, cutting into the psychic track, we are expected to usher in rapid growth in the future. The reasons are as follows:
Human service outsourcing track hundreds of billions of yuan blue sea, flexible employment to accelerate growth, leading enterprises are expected to be stronger.
1) Market scale: 100 billion yuan human service outsourcing track continues to expand. According to the head Leopard Research Institute, the domestic market will reach 264 billion yuan in 2020. With the support of the superposition policy of changes in supply and demand structure, the market size is expected to grow from 20.2% CAGR to 663 billion yuan in 2020-25. 2) Market segmentation: we believe that labor outsourcing dispatch is a traditional business and is expected to maintain steady growth. Flexible employment is more in line with the demand for flexible labor under the current new economic environment, and the market scale is expected to expand at a higher growth rate; 3) from the perspective of the competition pattern: the concentration of the domestic human service industry is relatively low, and we expect that market share will be concentrated to the head in the future driven by many factors. The stronger the human service leader is expected to be.
Core competence: in-depth, multi-dimensional to establish a leading edge. 1) Vertical: the company's business has covered the whole ecological chain of human service, and the five core businesses have formed an one-stop solution to enhance customer stickiness and their own profit share; 2) horizontal: global service layout, the domestic market is based on Shanghai and extends the whole country, casting a solid foundation, overseas markets in Singapore, radiating the Asia-Pacific market. 3) depth: the company's brand reputation is excellent. In the "customer is king" human service industry, the number of customers is more than 50,000 and most of them are industry leaders. In terms of customer stability, the retention rate of TOP100 customers will reach 100% in 2021.
Growth drivers: digital transformation, accelerated capital expansion, psychic track has a bright future. 1) acceleration of digital transformation: listing and raising 960 million yuan to invest in digital transformation, enabling the first line of domestic business backup platform, reducing cost and increasing efficiency, external cohesion platform integration industry, cloud platform to empower customers; 2) the prospect of strategic M & An is promising: the company has excellent cash flow and leading peers in cash on hand. In the future, it is expected to follow the international leader to accelerate the pace of capital operation, bring synergy to the company's main business, and accelerate cross-regional development. 3) Business outsourcing services are expected to rise in both volume and price: in the face of the pain points in the flexible employment industry, we believe that the company is expected to solve the problem smoothly with the existing business resources, and then cut into the high-prosperity racetrack; there is a broad space for optimizing the unit price of business outsourcing services, and there is sufficient momentum to increase the volume of business.
What is the biggest difference between us and the market? We believe that the market underestimates the customer advantages and service experience accumulated by the company, as well as the customer acquisition potential and broad M & An opportunities in the field of flexible employment in a broad sense.
Potential catalysts: acceleration of digital transformation, smooth expansion of mergers and acquisitions, continuous acquisition of key customers of business outsourcing.
Profit forecast and valuation
We estimate that the EPS of the company in 22-24 is 0.26, 0.30, 0.35 and CAGR is 17%, respectively. The current share price corresponds to the 23-pound, 24-year, 20-pound, 17-fold P-amp E. For the first time, the coverage gives the industry a rating of outperformance, with a target price of 7.5 yuan with reference to the valuation of comparable companies, corresponding to twenty-four-year, 25-pound, 21-fold Pmax E, with 26% upside space.
Risk.
The repeated risk of epidemic situation, the aggravating risk of industry competition and the risk of macroeconomic fluctuation.