The strategy of "Mobile Internet + IoT" is gradually taking shape.
Around the strategic goal of "Mobile Internet + IoT + big data", Shida Group gradually builds the service provider of the whole industry chain through acquisition. Based on mobile communication intelligent terminal ODM business (Shenzhen Xingfei), the company extends upstream to intelligent terminal R & D and design (Oriental Tuoyu) and intelligent terminal battery and power accessories (Ruide Electronics), and downstream to Internet marketing (Asahi network), logistics express delivery and security monitoring industry applications.
The main acquisition targets fully fulfilled their profit commitments in 2016, and slightly over-fulfilled.
The country has promoted the "intelligent frontier" strategy, and the Xinjiang border security market is about to break out. In 2016, the company acquired China Science and Technology financing, and cut into the security business around the Internet of things. The company has successfully opened the judicial, border defense and airport three major anti-invasion markets, and established a leading position.
The company's core technology comes from the Chinese Academy of Sciences and maintains close cooperation with the Chinese Academy of Sciences in industry application demonstration. In 2016, the company's security business achieved an operating income of 124 million yuan, an increase of 78 percent over 2015, and a gross profit of 54 million yuan.
The company's Internet of things perimeter security products mainly include prison Internet of things intelligent security platform, border intrusion prevention and control platform, land-based viewing and aiming system, etc., the former market is represented by prisons, drug rehabilitation centers, detention centers, with a scale of 10 billion yuan; the latter two technologies face the frontier defense market of the order of 50 billion, which is at the forefront of the upcoming outbreak. With the continuous deepening of the national strategy of "intelligent frontier", the prosperity of the security industry in Xinjiang is booming, and the performance is expected to show explosive growth from 2017 to 2019.
Mobile intelligent terminal service contributes cash cow
Shenzhen Xingfei, a subsidiary of the company, is a leading manufacturer of mobile intelligent terminal ODM in China. Mobile phone products contributed most of the company's revenue in 2016, mainly intelligent terminals, functional terminals and battery power supplies. Xingfei has formed a close cooperative relationship with ZTE, TCL, Baoqianli and other customers and has strong market competitiveness; at present, the company has three major production bases in Huizhou, Zhengzhou and Wuhu, two major R & D centers in Shenzhen and Nanjing, 13 SMT (surface mount technology) production lines and 17 whole machine assembly lines. In 2016, the company's mobile phone shipments ranked among the top 10 of domestic ODM manufacturers.
Profit forecast and valuation
We forecast that Shida Group's revenue in 2017 / 2018 is 62 / 7 billion yuan, net profit is 2.7 / 380 million yuan, and CAGR is 38% in the next three years. At present, it corresponds to 18 times of PE 25ax in 2017 / 18, with a buy rating and a target price of 14.50 yuan.
Risk tips: 1) the bargaining power of downstream customers of ODM manufacturers is higher, and it is difficult to raise the level of gross profit margin. 2) in recent years, the company has more asset mergers and acquisitions, a large scale of goodwill, and there is a potential impairment risk.