We conducted field research on Daheng Technology on November 9 and exchanged views with company management on recent business conditions and company strategies in various business segments.
The company was transformed into an investment holding incubation enterprise. At the beginning of listing, the company's main business was IT equipment and office automation distribution, and has now successfully transformed into an investment holding and incubation enterprise. Currently, the company has four main business segments: opto-mechatronics integration, information technology and office automation, television digital network editing and broadcasting systems, and semiconductor components. The operating income mainly comes from the three major holding subsidiaries of Daheng Group, Zhongke Dayang, and Ningbo Mingxi.
Daheng Group's growth comes from Daheng images. Although Daheng Group's revenue reached 2.5 billion dollars in 2009, accounting for 76% of the total consolidated statement, it contributed only about 30 million yuan to net profit. The future highlights come from its Daheng image. Daheng Imaging's two main products, industrial online visual inspection equipment and intelligent transportation cameras, are expected to continue to grow at a high rate.
Zhongke Taiyang is a leader in the digital television programming and broadcasting system industry. Relying on the Chinese Academy of Sciences, China Science and Technology Taiyang has obvious technical advantages. The market share is over 50%. Although the revenue growth rate is relatively stable (around 10%), profitability is strong, and gross margin remains around 50%.
Ningbo Mingxin ushered in an inflection point in its performance. Ningbo Mingxin specializes in semiconductor power device sealing and testing, and achieved an annual profit of 5.76 million yuan in the first half of the year, successfully reversing losses. The comprehensive cooperation with Japan's Indah enabled the company to extend upstream in the industrial chain to enhance the company's profitability.
The dust on Nuoan Fund's equity transfers is expected to settle during the year. In 2007, the company agreed to transfer 20% of the shares of Zhongguancun Science City Visa Nuoan Fund, the second shareholder at the time. As the three-year term of the supplementary agreement expires, the equity transfer of the Nuoan Fund is expected to be completed within the year. The contribution of Nuoan Fund to performance in 2011 changed from dividends under the cost method to investment income under the equity method.
Valuation and profit forecast: We expect the company's EPS for 2010-2012 to be 0.27 yuan, 0.36 yuan, and 0.38 yuan respectively, and the corresponding dynamic PE is 37 times, 28 times, and 26 times, respectively. The investment income of Zhongke Taiyang and Nuoan Fund will bring stable performance to the company, while the image vision field and semiconductor power devices will bring rapid growth to the company's performance. We gave it an “increase in holdings” rating.