Main points of investment:

Transform into business factoring and enjoy the space for the development of the industry

Factoring is a comprehensive financial service which integrates accounts receivable management, collection, bad debt guarantee and financing on the premise that creditors transfer their accounts receivable. Factoring has the advantages of short approval cycle and simple operation procedures, and to some extent promotes the blowout development of the industry.

Successfully completed the acquisition of Moshan factoring and entered the field of commercial factoring. In March 2016, the company acquired 100% stake in Moshan factoring in cash. Falsheng realized a net profit of 141 million yuan in 2016. Among them, commercial factoring (that is, a wholly-owned subsidiary, Moshan factoring) achieved a net profit of 126 million yuan, and commercial factoring accounted for 89.36% of the net profit, becoming the key core business of the company's profits.

To maintain the leading position in the industry, many A-share listed companies with pure commercial factoring are also involved in the commercial factoring industry, but most of their business factoring services are the supply chain financial system of commodities. It can be considered that Falsen is the only pure commercial factoring target for A-shares. In 2016, the factoring business scale of Mount Mount factoring is about 5 billion yuan, and the industry status has been initially established. Factoring industry essentially belongs to the emerging financial field, and its industry barriers are mainly reflected in capital, talent and risk control. In terms of capital, Moshan factoring is the first commercial factoring company in China to issue factoring ABS; in terms of talents, members of the company's core management team have rich experience in the financial industry and management experience; in terms of risk control, the company has established a sound risk approval process.

Profit forecast and valuation

We believe that the development of the company's main business of traditional financial products is basically stable, while the factoring industry is in a period of rapid development. With the company's technical, talent and financial advantages in the field of business factoring, the business scale is expected to increase significantly and become the main driving force of the company's profits. It is estimated that from 2017 to 2018, the company will achieve a net profit of 192 million, 211 million and 239 million yuan attributed to the parent company, corresponding to an EPS of 0.51,0.56,0.60 yuan, with a "recommended" rating.

Risk hint

Higher-than-expected fluctuations in the traditional metal industry; credit risk in factoring; policy risk in commercial factoring industry; macroeconomic downside risk.