The company is the leading enterprise of financial instruments such as banknote detector and sorter.

Guao Science and Technology is a comprehensive high-tech enterprise engaged in the research and development, production, sales and service of financial tools, including banknote detector, sorting machine, binding machine, all-in-one machine and so on. In the first half of 2016, sorters and banknote detectors contributed 88% of the company's revenue and 86% of the company's gross profit. The company has successfully become a supplier to major domestic commercial banks such as the establishment of diplomatic relations between China and farmers, as well as exported to Europe, the United States, Southeast Asia and other regions.

In recent years, revenue growth and profits have declined slightly. The company's revenue growth slowed down in 2015 and 2016. At the industry level, the decline in performance in 2016 was mainly due to the postponement of 2015 equipment procurement requirements by banks due to the issuance of new 100-yuan banknotes in November 2015. There are three main reasons that affect the performance at the company level: 1) the decline in the unit price of the company's product sales; 2) the completion of the initial public offering and listing on the gem, the increase in listing-related expenses; 3) the company's R & D investment continues to increase.

Currently in the business cycle of the industry, the company seizes the opportunity to increase market share

The new 100-yuan banknote will start the equipment update cycle. We expect that financial instruments such as sorters and banknote checking machines will be in an upward cycle in 2017: 1) 2013 is the last peak of fixed asset investment in the banking industry, taking into account the 3-5-year useful life of financial instruments, the replacement peak may begin to occur in 2017. 2) in 2015, the central bank began to issue a new version of 100-yuan banknotes, which significantly reduced the purchase of bank equipment in 2015. The backward shift in equipment procurement demand, coupled with the updating demand brought about by the identification of new banknotes, will lead to a small replacement wave in 1-2 years.

Policy drives the growth space of sorters. The banknote sorting machine is used for the identification, counting, sorting, binding and other functions of a large number of banknotes. at present, it is mainly used in cash processing centers such as head offices and branches. We estimate that the equipment rate of banknote sorters in bank outlets across the country will be 26% in 2016, and there is still a lot of room for improvement, and the ultimate goal is to fully sort, that is, 100%. The end of 2017 is the second time point for the central bank's guidance to assess the target of full sorting, and the market demand for clearing machines is expected to grow by 20% in 2017.

The product upgrade of the banknote detector offsets the drop in price. Banknote checking machines are widely used in banks, enterprises, shopping malls and hospitals that receive a large number of banknotes, with an annual demand of more than 6 million sets, corresponding to a market size of about 6 billion. In 2011, the introduction of the "new national standard" triggered a wave of replacement of the spot banknote detector. According to the income structure of Guao Science and Technology, Class A machines account for more than 90% of the company's banknote detector business income.

The fund-raising project helps the company to improve its production capacity, channels and technology in three major directions: expanding production capacity, solving the capacity bottleneck of sorters, building a service network, seizing the development opportunity of channel sinking, and upgrading the technology center to prepare for the research and development of new products such as ATM machines.

We predict that the company's revenue in the past 18 years will reach 350 million yuan, net profit will reach 0.5 billion yuan, and net profit growth rate will be 37% 34%. In view of the fact that the financial equipment industry is in a rising period of business cycle, as a leading company in the industry, it is recommended to pay attention to it for a long time.