The results of the field investigation of China Science and Technology Ocean have verified the excellent fundamentals of the company.
Recently, we went to Daheng Technology holding subsidiary Zhongke Dayang (listed company holding 56%) to conduct field research. Through the communication with the company's management and specific business personnel, we learned about the company's product layout, TV station HD video and audio equipment requirements, as well as the company's recent business development. We believe that the fundamentals of the company are quite solid, and China Science and Technology Ocean will achieve rapid growth in the face of the opportunities in the HD market that has just started and is accelerating its development.
There is a broad space for the HD market of TV stations.
We have learned through research that the average price of HD equipment is about twice that of SD, and upgrading HD requires the purchase of a new set of equipment from scratch. According to the current situation, the initial purchase amount of each TV station in the video and audio field in the process of HD upgrade is about 50 million, and it needs to increase the investment on a larger scale with the increase of the number of HD channels.
The curtain of TV station HD upgrade has been opened, and it is expected that the development will accelerate in 2011.
Our management of Zhongke Ocean has confirmed that at present, a large number of TV stations have been actively upgrading to HD or are actively preparing for upgrading, and the HD market has shown a trend of upgrading in an all-round way. Since the second half of 2010, the company has seen a significant increase in orders for television HD upgrades, and the management is very positive and optimistic about the company's growth prospects next year.
Valuation: the stock price is seriously undervalued, reiterating the buy rating
We use segment plus sum (SOTP) method to value Daheng Technology. Combined with the market valuation and the growth of Daheng Technology business, we come up with a target price of 20 yuan for 11 years. Corresponding to the 11 / 12 price-to-earnings ratio of 340.25 times. The current share price only corresponds to the 11 / 12 price-to-earnings ratio of 21.0 pound 15.3 times, seriously undervalued, reiterated to buy.