Leading domestic identification solution service provider
As a leader in the field of identification, the company has now formed a three-level business hierarchy: identity authentication solutions, industry-intensive solutions, and intelligent cognitive solutions (commercial artificial intelligence systems). Following the decline in performance in 2016, the company achieved revenue/net profit of 241 million yuan/11.3525 million yuan in Q1-Q3 in 2017, an increase of 28.22%/13.77% over the previous year. The company successfully transformed in 2017, and the second-tier four industry intensive programs became the main support for performance. We believe that in the future, with the rapid expansion of the solution business and the gradual implementation of the intelligent cognitive solution business in the company's industry, the company's revenue and profit are expected to enter a rapid development channel. Considering the company's business collaboration and future mergers and acquisitions expectations, we believe that the company's reasonable price range is 21.06-22.56 yuan, covering the “increase in holdings” rating for the first time.
Based on the identity authentication business, the mobile exhibition industry is developing rapidly
The identity authentication industry revolves around second-generation resident ID cards and has room for continuous upgrading and development; it is strictly supervised by the public security department and has a high security threshold. As one of the industry leaders, the company has a good customer base, but due to the significant increase in competition in the intelligent identity authentication industry in 2014, the company adjusted its strategic direction and gradually switched to mobile exhibition business. The mobile exhibition industry has changed the financial counter sales model, has significant advantages, and has broad scope for development. The company's products in this industry include secure reinforced tablets, multi-functional supporting terminals, and supporting management software. Revenue increased 1168.70% in 2016.
Bank doctor's self-help and computer vision became the main growth points of performance in 2017
Two subsidiaries, Synth Xuhui and Synth Etu, contributed to the company's self-help and computer vision businesses respectively, which were the main performance growth points in '17. Bank Medical Self-Service is the company's intelligent equipment, which is of great significance in improving hospital efficiency. Currently, the market space in the industry is large, and there is no clear leader in the industry. Synth Xuhui has risen to the ranks of first-tier brands, and has added collaborative in-clinic payments and operating room self-service changing equipment to Bank Medical's self-service equipment. Computer vision is a pioneering subject in artificial intelligence. It has maintained rapid growth. The company collaborated with Yitu, one of the most technologically advanced startups in the industry, to develop products and promote deep technology integration. This business revenue is expected to exceed 80 million yuan in 2017.
Merger and acquisition of Innovo into the special equipment industry; with IBM, the sword points to AI commercial applications
The company plans to buy Innovo for 192 million dollars to enter the special equipment industry. Innowei's main products are special wireless communication equipment used in public security, security, confidentiality, railway and other industries. Innuowei's industry has great potential, stable customers, and obvious product differences, and may form collaborations with the company in the future. The company is positioned as a commercial artificial intelligence application enterprise in the future, and is currently using the development of convenient payment services to reserve the big data resources necessary for AI. A partnership was obtained with IBM Watson and increased its investment in AI up-and-coming Baiying Technology. At present, the company has made phased breakthroughs in all three directions of preparation.
The target price was 21.06-22.56 yuan, which covered the “increase in holdings” rating for the first time
The company's acquisition of Innowei has been approved by the Securities Regulatory Commission. Assuming the consolidated table in January 2018, it is estimated that EPS will be 0.19/0.47/0.64 after full dilution from '17 to '19. Traditional businesses are comparable to the average PE of a company in 18 years. Considering the company's two business collaborations and the future growth of the artificial intelligence business, we think the company's reasonable price range is 21.06-22.56 yuan, which corresponds to 45-48 times PE in 18 years when the acquisition is completed. The first coverage gave an “increase in holdings” rating.
Risk warning: Risk of rapid decline in main business revenue; risk that the target promised net profit cannot be realized.