I. Overview of events
Recently, we have conducted a survey of the company and have a detailed understanding of the company's business and future strategic development. the company's products have leading advantages in the fields of banknote detector, sorter, and all-in-one machines.
II. Analysis and judgment
The leader in financial equipment.
The company is one of the leading enterprises of financial instruments such as banknote detector and sorter, and is a comprehensive high-tech enterprise engaged in the research and development, production, sales and service of financial machinery. the products include banknote detector, sorter, binding machine, integrated 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 of major domestic commercial banks such as the establishment of diplomatic relations between China and Peasants, and its products are exported to Europe and the United States, Southeast Asia and other regions.
In the past two years, the company is mainly due to the increased investment in R & D and the construction of marketing network in recent years, resulting in an increase in management expenses and sales expenses compared with the previous year, while the increase in sales revenue is not large.
Get the tender twice and gradually expand the market share.
The competition in the sorter market is fierce, and the product price continues to decline, but the company's sorter series products continue to win the bid. In May 2017, the company received the bid winning notice of the Bank of Nanjing and identified the company as the shortlisted supplier of three types of RMB banknote sorters; received the bid winning notice of the Bank of Shanghai, and identified the company as the shortlisted unit of two small sorters and one medium sorter. At the same time, the company strives to expand the county-level market and expand its market share.
Seize the opportunity, the new 100-yuan banknote starts the equipment renewal cycle.
In the second half of 2017, financial instruments such as sorting machines and banknote checking machines will be on the rise. We believe that there are two reasons:
One of the financial instruments has a useful life of 3-5 years, considering that the last peak of fixed asset investment in the banking industry occurred in 2013, so the replacement peak may begin to occur in 2017. Second, the central bank began to issue a new version of 100-yuan banknotes in 2015, which makes the purchase demand for bank equipment backward, coupled with the updated demand brought about by the new banknote identification, which will lead to a new trend of 1-2 years.
Maintain R & D investment and give birth to new products
The company invests more than 10% in R & D every year, and will develop all-in-one machine, CRS, middle and back-end software system on the basis of sorting machine and banknote counting machine in the next two or three years. At present, both CRS access all-in-one and ATM are in the testing stage, and some intelligent cash processing devices have been sold. We expect that the advent of intelligent cash processing equipment will have a positive impact on market share, and the company will continue to develop sophisticated products to meet the needs of all kinds of customers in the future.
Actively open up overseas markets and increase the proportion of business income
The company has acquired the qualification to develop overseas markets and is now actively making efforts overseas. Last year, it set up an office in India and sold more than a thousand machines in Spain. This year, it has mainly expanded to South Africa, Spain, India and Spain. Therefore, we believe that overseas revenue is expected to reach more than 20 million in 2017, an increase of about 50-60 per cent over 2016.
Third, profit forecast and investment suggestions
We estimate that the operating income of the company from 2017 to 2019 is 340 million, 420 million and 530 million respectively, the net profit is 46 million, 59 million and 68 million respectively, and the corresponding EPS is 0.62,0.8 and 0.92 yuan respectively. According to the company's current share price, the PE is 57.8X, 45x and 39.2x, respectively. The company's sorting machines, banknote checking machines, and other self-service equipment products are expected to grow rapidly in the next two or three years. We believe that the reasonable valuation range of the company in 2017 is 65-70 times, corresponding to the reasonable valuation of 40.3-43.4 yuan in 2017, covering the rating of "cautious recommendation" for the first time.
Fourth, risk tips:
1) overseas market risks; 2) major technical risks; 3) growth sectors fall short of expectations.
