Main points of investment
Since the beginning of the year, the company has completed three major acquisitions: since 2017, the company has successively completed three major equity acquisitions of Sanqi Communications, Yingka Technology and Shanghai Hangsheng with a consideration of 590 million yuan, 127 million yuan and 143 million yuan, and the pace of extension strategy has been significantly accelerated. Based on the simple calculation of performance commitment, Sanqi Communications, British Card Technology and Shanghai Hangsheng all have good growth prospects, and the growth rate of performance in the commitment period will be maintained in double digits. At present, three Flags Communications and British Card Technology have fulfilled their performance commitments in 2016, with completion rates of 102.43% and 103.28%, respectively.
Mergers and acquisitions help the company deepen the layout of the industrial chain: in terms of business, the main areas of Sanqi Communications, Yingka Technology and Shanghai Hangsheng are vehicle networking products and wireless data terminals, vehicle networking SaaS services and vehicle networking technical services, commercial vehicle pre-loading equipment, and all have a number of high-quality customers. We believe that the company's acquisition of Sanqi Communications, Yingka Technology and Shanghai Hangsheng is a key step in improving the layout of the vehicle networking industry chain of "software + hardware + operation platform". At the same time, the three mergers and acquisitions are also conducive to the company's business structure to further tilt towards mid-and high-end products and preloading projects, and to cut into the commercial vehicle market and expand overseas business, which is of great strategic significance for the company's long-term development.
The extension strategy has led to the rapid growth of the company's performance: since the beginning of the year, the company's revenue and return net profit have accelerated, in addition to being driven by endogenous growth and the improvement of comprehensive gross profit margin, according to the company's semi-annual report, the contribution of Sanqi Communications and British Card Technology to the second quarter revenue and return net profit accounted for 30.3% and 45.7% respectively, indicating that the extension strategy has made a significant contribution to the company's performance growth. In addition, the 95% stake in Shanghai Hangsheng acquired by the company was completed on October 18 and will be consolidated in the fourth quarter, which will further increase the company's performance growth in the fourth quarter and next year.
Profit forecast and investment advice: in view of the smooth progress of the company's M & A strategy, obvious synergy at the technology, product and channel levels, and good endogenous growth, we have raised the company's profit forecast for 2017-2019 to RMB 0.39,0.58 (up 19%) and 0.73 yuan (up 17%), respectively. The PPink E corresponding to the closing price on October 30 is about 44.5, 30.1 and 23.9 times, respectively. With the rapid development of vehicle networking and the general trend of intelligent vehicle equipment, we are optimistic about the strategic layout and development prospects of the company, and maintain the "recommended" rating.
Risk tips: increased competition in the car Internet market; the company's strategic landing progress is not as expected; downstream automobile industry recession; goodwill impairment risk.
