Investment Overview

Wai Tung Group (Wai Tung) is a domestic information services and B2B e-commerce service company. Its main business includes trading, data and information services. Assuming a price-earnings ratio of 22 times in 2018 (the average of the past five years is 24 times, we consider 22 times within a reasonable range), we arrive at a target price of HK$6.70 and maintain a “buy” rating, with a potential return of about 44.4%.

(Current prices as of February 11)

Performance review

The Group announced that sales revenue exceeded RMB 10 billion, a sharp increase of more than 170%. The group said that the increase in sales revenue was mainly due to the initial results of the industrial Internet layout, which led to a significant increase in trading service revenue. Simultaneous data services are also developing rapidly. This figure is close to our earlier forecast (2018F sales revenue: 10.9 billion), and I believe the Group's revenue will eventually reach our expectations.

However, the sharp increase in sales revenue this time comes mainly from the trading sector where gross margins are lower, so we believe that the increase in net profit will fall short of the increase in sales revenue. We expect net profit in 2018 to be 349 million yuan, an increase of about 10% over the previous year. However, we believe that the Group is in the layout stage. The primary goal is to increase the number of users and usage of the platform, so we believe that even if there is no clear sharp increase in net profit, the marked increase in sales revenue has proven that the Group's strategy is being carried out ideally.

Business Status

New business structure

The group reclassified the company's business structure into a new technology retail business group, a smart industry business group, and a platform and enterprise service business group.