Bank of China International recently held an unconventional roadshow with Jinbonda Baojia (3315.HK/HK$4.03, buy). Leaders attending the conference included Chief Financial Officer Ms. Li Yijin and Director of Investor Relations Ms. Li Qiuyan. Management predicts that the average price of smart cards will continue to be under pressure in the second half of 2015, but the company plans to maintain overall stability in gross margin through stricter cost control. Below is a summary of this non-deal roadshow. The plan for the second half of 2015 is to keep gross margin stable. In the first half of 2015, the company's average smart card sales price declined 17% year over year and 4% month on month, partially offsetting the 31% increase in smart card sales volume over the same period last year. Management said that the decline in average sales prices occurred mainly in the second half of '14, for reasons such as: 1) banks lowered purchase prices due to increased purchasing volume; 2) the use of lower-priced, lower-capacity chips because they were sufficient to meet demand; 3) the second-largest chipset supplier, Infineon Technology (IFX.GR/EUR 9.782, no rating) entered the Chinese market, breaking the monopoly position of NXP Semiconductors (NXPI. US/USD 88.87, no ratings) in the Chinese chip market; and 4) competition in the smart card market is intensifying. Management predicts that the average sales price of smart cards may fall 10-15% year over year throughout the year, which means that the average sales price for the second half of 2015 fell 5-10% month-on-month. The company will try to shift price pressure to chip cost reduction, so as to keep the gross margin in the second half of 2015 at the same level as the first half of the year. The company predicts that smart card shipments in the second half of 2015 will be comparable to the first half of the year. The use of domestic chipsets is still in its infancy. Currently, more than 90% of the company's smart bank cards use NXP chipsets, but that percentage is gradually declining. The rest of the chipsets are mainly supplied by Infineon. Domestic chip usage accounts for less than 1% of the total number of bank cards. The certification process for domestically produced chips has been completed. However, management said that domestic chips still need to be improved in terms of technology, capacity, and application compatibility, such as compatibility and response speed for various new applications. The potential rise in the use of domestically produced chips will depend on government policies and further purchases by major banks. In the short term, domestic chips have no cost advantage over foreign chips, but because of government subsidies, they may offer prices similar to overseas brands. Management said that if the government requires smart bank cards to use a certain percentage of domestic chips, then because the price of domestic chips may be more stable than overseas chips, it helps the company maintain a stable average sales price and unit gross profit. Expanding into new areas to support sustainable growth. With more than 1 billion yuan in cash on hand, management said the company is seeking investment opportunities in the payment ecosystem to sustain long-term growth. (1) Philippines: The company has established a joint venture in the Philippines to provide personalized financial card services and overall payment solutions in the region to help promote the development of the smart payment industry in the region. The company holds a 45% interest in the joint venture. In addition to sharing the profits of the joint venture's personalized business, the regional business has also created demand for the company's smart card business. (2) US: Since June 2015, Kimbonda Baojia has cooperated with a local bank card manufacturer in the US to provide IC cards to the US market. The company predicts that the US business will initially generate revenue of about 10 million yuan a year. (3) Sichuan Zhongsoft: In August 2015, the company acquired 19.68% of Sichuan Zhongsoft's interests at a total price of 30 million yuan. Through this partnership, the company hopes to accelerate development in the fields of software, smart cities, and payment platforms.