Third party card payments, Shanghai is rich in resources and high quality. Shanghai Zhifu is a holding group company focusing on data services for small and micro merchants. Its subsidiary Dianbaiqu has a national bank card billing license and provides payment for various payment needs carried out by small and micro merchants through MPOS hardware terminals. It is in the middle and upper reaches of the MPOS smart billing field. Users of Shanghai Zhifu's payment app, PayPay, also ranked 13th among 63 mobile payment apps. At present, Shanghai Zhifu has established strategic partnerships with more than 1,700 outsourced service agencies, served a total of 2.5 million customers, and established 36 branches in various provinces and cities. The scope of business covers the whole country and is rich in resources.
The financial layout has been taken to the next level to further strengthen synergies. The company has previously set up a Pioneer Fund, acquired Hong Kong Yisheng Securities, targeted additional investment into a fintech cloud service platform project, and set up Zhonghui Mutual Insurance Company. The acquisition further improved the company's layout in the financial sector and had a synergistic effect with existing financial business. Furthermore, after this acquisition, the company will obtain a large amount of small and micro enterprise transaction data, which is also conducive to the further expansion of the company's big data field layout.
The target of the acquisition has good growth, strong profitability, and enhanced performance of the acquisition. Shanghai, the target of this acquisition, has grown rapidly and has good profitability. Its net profit for the first half of 2014, 2015, and 2016 was 1,242,400 yuan, 43.51 million yuan, and 74.48436 million yuan respectively. The cumulative transaction amount processed in the first half of 2016 reached 279.425 billion yuan. The performance promises of this acquisition in 2016, 2017, and 2018 were 150 million yuan, 200 million yuan, and 250 million yuan respectively. The performance promises showed its profit confidence, and mergers and acquisitions would significantly increase the company's profits.
Investment advice: Assuming that the company is consolidated for the full year of 2017, without considering the acquisition of the remaining 20% of shares, it is estimated that the company's 2016/2017 EPS 0.10/0.34 will be upgraded to a “buy” rating.
Risk Warning: Uncertainties in Major Asset Restructurings