Report highlights
Description of the event
Oriental Communications published its 2015 annual report. According to the report, the company achieved operating income of 3,566 million yuan for the full year of 2015, a year-on-year decrease of 3.92%; net profit attributable to shareholders of listed companies was 170 million yuan, a year-on-year decrease of 5.38%. Basic earnings per share were $0.135.
Incident comments
The core business continued to grow, and net profit after deduction increased significantly: the company's operating income declined slightly in 2015, but the company's two core businesses, the communication electronics business and the financial electronics business, both maintained a good growth trend. Specifically, benefiting from the increase in order revenue from private network services and the trend of domestic substitution in the financial electronics industry, revenue from the communication electronics business and the financial electronics business increased 12.31% and 4.14%, respectively. In terms of net profit, although the company's net profit declined throughout the year, driven by the two factors of a slight increase in gross margin and a decrease in the cost rate, its net profit after deduction increased 29% year-on-year, and the profit level continued to rise. Considering the upturn in the cluster private network industry and the financial electronics industry, we judge that the company's two core businesses will maintain a good momentum of development.
Benefiting from the trend of domestic substitution, the financial electronics business continues to grow: Looking ahead, we believe that the company's financial electronics business, as its main source of revenue and profit, will continue to grow rapidly over a long period of time. Specifically: 1. The financial electronics industry still has huge room for development. Currently, the number of domestic ATMs per capita ownership is still far below the level of developed countries abroad; 2. The trend of localization and substitution of financial machines is clear, providing a more relaxed market environment for local manufacturers in China; among them, all-in-one deposit/withdrawal machines still heavily use foreign products, and domestic substitution will provide significant market space; 3. The company not only has superior customer resources such as ICBC, Post, Everbright, etc., but is also actively developing new customer markets to ensure the continuous expansion of its business scale. We believe that the company has a leading edge in the field of financial electronics and will benefit from the development of the industry for a long time and support the continuous growth of the company's revenue and profit.
The demand for cluster private network construction is huge, providing an impetus for accelerated growth: as can be seen, the company, as a leading enterprise in the cluster private network industry, will be the first to benefit from the rapid growth in market demand. Specifically: 1. The acceleration of rail transit construction across the country has become an excellent opportunity for the company to expand the TETRA product line; 2. The demand for digital upgrades for police clusters in various provinces and cities is urgent, driving the PDT private network market into a high boom stage; 3. The demand of private network users for the next generation of private network cluster products is gradually emerging, and the company will continue to make full use of its technical advantages in the field of private networks and public networks by adopting a broad and narrow band integration technology approach. We believe that in the face of huge market demand, the company's cluster private network business has high growth elasticity, which will provide a strong impetus for the accelerated growth of the company's performance.
Investment advice: We are optimistic about the company's development prospects. We expect the company's EPS for 2016-2018 to be 0.19 yuan, 0.24 yuan, and 0.29 yuan respectively, giving the company a “buy” rating.