Company account

The company service includes embedded parts and security payment products and service divisions.

Embedded hardware and secure payment products: the company provides security payment products and the overall development of hardware, in which the security of the chip and the development of payment components and operating systems are the core of its technology. In addition, it also includes a number of services such as card design, job development, production, and so on.

Peace and service: integrate new financial technology to provide data processing services, system peace and other integrated solutions for customers in a wide range of fields, such as finance, government, health, transportation, retail and so on. These include:

Data processing service: after completing the hardware development and implementation of the card, the company will encrypt the cardholder's personal information and personal information on the card, and send the data center to the cardholder.

Card system solution: including the implementation of mobile financial services in the mobile networks of opportunities, shops, clubs and communities. The company provides the market card terminal, hardware development, security system, digital system and so on.

The first year of 2016

The 2016 collection recorded an employment contract of 1393.7 yuan and a profit of 204.9 yuan, a decrease of about 173% and 15.3% respectively in the previous year. The second half of 2016 is better than the first half of 2016. In the second half of 2016, the ratio of income and expenditure of collective employment increased by about 4.5%, and the ratio of profit and expenditure increased by about 14.8%.

The gross profit margin and profit margin reached 30.1% and 14.7% respectively, up 3.7 percentage points and 0.3 percentage points respectively last year. The increase in profit rate is mainly due to the continuous launch of new products and the integration of products. The following is the deterioration of the company's interest rates from 2013 to 2016.

By the end of 2016, 1.763 billion yuan of gold will be available to the people, and the company's cash per share will be 2.11 yuan. The Board meeting recommended the payment of a final dividend of HK7.0 cents per ordinary share and a special dividend of HK6.0 cents per ordinary share for the year ended 31 December 2016. With an interim dividend of HKD 4.0, the dividend ratio for the whole of 2016 is calculated to be 61%. The downside is the dividend payout and dividend payout ratio per share in recent years.

Industry contract opportunity

In June 2016, the people's Bank of China issued the Circular of the people's Bank of China on further strengthening the management of bank cards, requiring that the magnetic trading of chip magnetic hybrid cards be completely shut down from May 1, 2017, and that commercial banks speed up the conversion of stock magnetic tape cards to financial IC cards.

From 2012 to 2015, the industry profit model grew rapidly as a result of the upgrading of bank cards from magnetic strips to replacement requirements for chip cards. In 2015, the company's operating expenses and profits increased by 149% and 110% respectively in 2012 before going public. The stock replacement period has been entered since the beginning of 2016, plus the product replacement period of 3-5 years for chip cards, the non-compliance model plan will maintain stable development.

Since January 1, 2017, the new credit card policy issued by the central bank has been formally implemented, which will promote the marketization of credit card interest rates, the opening of interest-free loan periods and minimum loan restrictions, and further promote the diversification and differentiation of credit card products and services. The development of China's credit card market is relatively slow, which has something to do with the perfection of the credit system and the management of credit control, while the safety of credit card equipment may grow faster in the coming years, and credit card products will become more sophisticated in the future.

In 2015, the Chinese government announced the opening of the people's settlement market. Visa Inc, MasterCard and other card organizations are expected to formally enter the Chinese market to promote their own-brand financial services by the end of 17 or the beginning of 18 at the earliest, creating new incremental demand for China's credit card market.

Industry pickings

However, the use of mobile payment depends on the bank card payment, which does not affect the card requirement of the bank card as the bank certificate certificate, but the bank card payment still uses the mobile phone to pay, such as the payment card and WeChat Pay's payment. In addition, the government has more strict supervision of mutual financing and third-party payment services, with a decline in corporate turnover in the first half of 2016. The main purpose of the supervision and control of the financial industry is to control the financial sector, which will naturally exert a lasting impact on the industry as a whole, but it will have a long-term positive impact. As the control of the financial market becomes more and more strict, the market will become more and more standardized, and it will gradually return to rationality, which will be beneficial to the main banks in the financial system, and in the long run, it will be beneficial to the company.

Diversification of domestic and foreign chips

Chips are currently the main cost of IC cards. The cost of the company's chip has been reduced in 2016, and the company will continue to control the cost in 2017. Clients will also become more and more diverse. The market situation of chips has changed, including the skewed policy towards domestic chips, and other imported chip brands have also entered the Chinese market. The company's ability to compete with suppliers is also constantly improving.

The structure of products is changed and the intelligence is improved.

The company promotes product diversification and product structure, and promotes products with high added value and high gross margin to help solve the problem. In the future, the company will take Industrial 4.0 as the guide to enhance the digitization and informationization of customers, and improve the efficiency of the company.

Diversified development and investment in business and looking forward to it

In the future, while strengthening the core financial card service, the company will achieve the diversified development of products, not only develop multi-industry applied products, such as smart city, intelligent transportation and other government livelihood cards and high-end retail cards (such as Starbucks card). The new developments in 2017 will focus on GCaaS peace, intelligent security equipment, and system solutions, so as to provide more comprehensive financial services for financial institutions.

In addition, the company is in good health and has plenty of money, so it is worth looking forward to investing and planning in the future.

Increase the strength of overseas service equipment

The company actively promotes the global business strategy, and the overseas bureau promotes it further. The company will closely meet the demand for overseas sales and overseas chip card migration of Chinese companies, develop localized products and markets, tap the market power of South China and other regions, and the share of overseas income is expected to increase gradually in the future.

Valuation

Granted to the "Buy" level, with a target of HK $3.00. We expect FY2017/FY2018 profit to increase to 10.3%, 5.6%, based on a 9.0% increase in income from 8.0%. The target price of HK $3.00 corresponds to 9.8 times FY2017/FY2018 's forward price-to-earnings ratio. (as of March 23)

Cymbals

Mobile payment such as payment payment and WeChat Pay's payment

The development of overseas services is not as expected.