Benefiting from the improvement of management efficiency and the prominence of business focus, the company's positive profit notice revealed that it achieved an increase of about 170% in revenue and 30-50% in profit in the first half of the year. The revenue is much higher than we expected (130% growth), mainly due to 1) the rapid growth of B2B trading business, especially the high growth of the reverse market in the plastic-seeking sector; 2) the late consolidation time of Mianlian and China Mould International. Look forward to contributing higher revenue in the second half of the year; 3) because Zhongguancun online and Huicong net involve the merger of the company's team of more than 2can3, the work efficiency has been greatly improved.
Since the change of the board of directors, the new leadership has focused dozens of industries in the past on the three major industries of B2B (plastic, cotton and scaffolding), as well as the 3C business of B2C, building a closed-loop capability from information services to transactions. Last year, the company proposed that the core goal of this year is "transaction", with transactions in order to better achieve the pull of other areas of B2B (information, financial services … ). This draws lessons from the successful practice of leading people in the industry, such as BABA. For more than half a year, the company has indeed handed over a gratifying answer.
The revenue of the data service sector (Huijia Mobile and Zhaoxin anti-counterfeiting) increased significantly, and the order emergence company seized the strong demand for food and safety traceability of B2B enterprises, and successively signed contracts with more than a dozen major customers. including well-known enterprises such as Alipay, Petrochina Company Limited, Guizhou Moutai, Chengde Lulu, etc., data service revenue is expected to achieve more than 300% growth this year, with an income of 400 million to 500 million yuan. Hui chain (block chain) business has been recognized by the market, which is a scale breakthrough of block chain in industry application. We believe that with the inclusion of major customers, more and more different enterprises in the same industry will be widely adopted in the future, so that the revenue of the company's data services sector will maintain a high proportion of growth.
The compression of valuations this year has something to do with the industrial environment and market style. What the market may wonder is why the company's business is growing rapidly while valuations are constantly shrinking.
We believe that it is related to two factors: first, the market capitalization of the company is small and the liquidity is general. This year, the style of Hong Kong stocks is mainly based on large market capitalization and high liquidity, so the company's valuation has been continuously compressed; second, the market believes that the company's business carrier is in all areas of industry, and the expectation of deleveraging makes the market slightly less confident in the company's growth.
We believe that the results in the first half of the year can completely reassure investors and verify that the company is in the right direction of transformation-that is, a broad market space and an efficient team can create the growth momentum of the reverse industry.
Investment suggestion
From 2018 to 2019, we expect revenue growth of 169% to 69%, profit growth of 11%, 36%, EPS of HK $0.30 and HK $0.41 respectively (this year's profit growth is slower because of large non-recurrent income in 2017). We believe that the reasonable valuation of the company is 6.0-7.0RMB, corresponding to 2018 PE of 20-23 times.
Risk hint
The withdrawal of funds from Hong Kong stocks caused by the Fed's interest rate hike has a negative impact on the market; the risk that B2B business growth is lower than expected due to the macro environment.
