Events:
Recently, we have conducted field research on the company and communicated with the management of the company.
Comments:
The 13th five-year Plan promotes highway construction and stabilizes the growth of high-speed monitoring. The mileage of new expressways is planned to be 46000 km during the 13th five-year Plan period, and the mileage of expressways across the country will reach 169000 km by 2020, an increase of 37% over the current stage. In this context, as the highway "standard" high-speed video surveillance market will also grow. The company is the leader in the field of video transmission equipment in the middle section of domestic high-speed monitoring, and enjoys a high market share in domestic highways by virtue of its technical advantages, and on this basis, it has been expanded into a high-speed monitoring solution provider integrating front-end video capture, mid-section transmission and back-end storage display. We believe that the company will steadily obtain high-speed monitoring orders driven by the "13th five-year Plan" highway construction, and the business will grow steadily in the future.
Stand firm in the security monitoring industry and transform into a solution provider. Driven by the policy of Ping an City and Smart City, the market of the domestic security industry has maintained a high growth rate of 15% and 20% in recent years. Relying on the project experience and technical advantages accumulated in the high-speed video surveillance industry, the company successfully laid out the field of security monitoring, relying on OB-VAV3200 Ping an City Comprehensive Application Management platform and OB-VAR3S as the backbone to build a three-dimensional prevention and control system in Ping an City. At present, the company has successfully completed "Zhejiang Xiaoshan Ping an City", "Jiangsu Wuxi Ping an City", "Hebei Tangshan Ping an City" and other projects. We believe that the company's rich project experience accumulated in second-and third-tier cities will drive the company's business growth in the trend of urban security expansion to third-and fourth-tier cities. Revenue in the first half of 2016 reached 157 million yuan, an increase of 15.66% over the same period last year. In the next few years, the company's two traditional businesses, highway monitoring and urban security, will achieve steady growth.
The current management situation is mixed with joys and sorrows, and the company actively faces it. The entry threshold of front-end camera equipment is low and the market space is large, which makes many manufacturers hear the wind, resulting in serious product homogenization, intensified competition, lower prices and compressed profit margins. The company's front-end products and equipment can not avoid the disadvantages of the price war. The gross profit margin of the products has declined year by year, from 57.00% in 2013 to 46.38% in 2015. In the face of the current situation of declining product profit margins, on the one hand, the company strengthens technology research and development, combined with its own transmission technology to create a differential competitive advantage of products; on the other hand, it speeds up the construction of the sales team to increase product sales to make up for the loss of profits. In the first half of 2016, the company's sales expenses were 18 million, an increase of 68% over the same period last year. Most of the increase in expenses came from the increase in the salary of the sales team and transportation travel. In addition, the company's advance business model has also led to an increase in accounts receivable, with bills receivable reaching 3.71 million in the first half of 2016, a nearly four-fold increase over the same period last year, and other receivables reaching 16.26 million, an increase of 70 percent over the same period last year. In the future, the company will introduce a third-party financing model to speed up the speed of realization.
Try to build a video service platform, epitaxial acquisition is expected to be strong. The company is trying to build a video service B2B platform to provide video services for other enterprises, such as UAV inspection video services. In this way, the company can carry out a light asset operation model and establish a new growth point for future performance. On the one hand, the company pays attention to the research and development of related technologies, in which simple auxiliary recognition applications have formed mature products, and in the future the company will increase the research and development of artificial intelligence technologies such as face recognition in order to enhance the ability of video information analysis and create a video service platform with core competitiveness. On the other hand, the company tries to speed up the pace through the epitaxial acquisition strategy, in order to gain relevant core technology and operational experience, and enter the field of video services as soon as possible. Therefore, we think that the company has a strong expectation of epitaxial acquisition in the video service platform, and we suggest that we should pay attention to the dynamics of the company's capital operation.
The recommended rating is covered for the first time. We estimate that the EPS of 16,17,18 years is 0.24,0.30,0.36 yuan respectively, and the corresponding PE is 69,56 and 47 times, respectively. Taking into account the steady growth of the company's traditional business and the expectation of future extension mergers and acquisitions, the company is given a "recommended" rating.
Risk tips: product competition further intensified, gross profit margin decreased; epitaxial acquisition is not as expected.
