I. Incident Overview

The company published its 18-year annual report on April 2, 2019, achieving revenue of 2,397 million yuan, an increase of 23.81% over the previous year; achieving net profit of 101 million yuan to the mother, an increase of 347.06% over the previous year. The rapid growth in the company's revenue and net profit was caused by a year-on-year increase in sales revenue and profit in the financial terminal and smart education business.

II. Analysis and Judgment

The popularity of mPOS products stabilizes the company's market segment position, and upgrades tax control terminals to improve user experience

The company closely followed changes in market trends during the reporting period, adjusted mPOS machine prices in a timely manner in the face of fierce competition, and took advantage of scale, which prompted the company's mPOS product sales volume and revenue to increase dramatically over the same period last year. In addition, the company adjusted its sales structure in a timely manner to enter the mature traditional POS product market with high gross margins. Faced with the adverse effects of the policy on revenue and gross profit levels of 18-year tax controlled products, the company continued to optimize product costs and increase gross margin while increasing value-added services for 580 series products, improving service experience, and achieving sustainable development. The company's terminal business achieved revenue of 1,408 billion yuan during the reporting period, an increase of 57.42% over the previous year. In the future, as the company lays out the market for new and traditional POS products, speeding up the implementation of new payment scenarios and the coverage area and number of users of the tax control 580 series will promote the continuous development of the company's terminal business.

The smart education business is developing rapidly, building a brand by building demonstration zones and benchmark schools

Tianyu Education, a subsidiary of the company, focuses on user needs, enhances the market competitiveness of products such as education cloud platforms, smart classrooms, smart campuses, etc., while developing personalized learning products for students to prepare for the subsequent development of the C-side market. Currently, the company undertook cloud platform construction business in more than 10 provinces including Guangdong and Jiangsu, and smart campus and smart classroom business in many cities, achieving revenue of 264 million yuan during the reporting period, an increase of 190.00% over the previous year.

In 2019, the company will adhere to the “platform+ecosystem” strategy and use cloud platform technology to form an overall smart education solution integrating content, applications, services and terminals. Through building demonstration zones and benchmark schools, the company will establish a brand image, expand the area of deep operation, and promote continuous growth in the revenue and profit scale of the smart education business.

III. Investment Suggestions

First coverage, recommended rating. The company is good at keeping up with market changes, making full use of its scale advantages, continuously optimizing costs, and increasing the profit level of financial terminal products and smart education services. Therefore, we expect the company's EPS for 19-21 to be 0.33/0.45/0.58, and the corresponding current PE price is 41X/30X/23X.

4. Risk Reminder:

Terminal sales are not as good as expected, and smart education business expansion is not as good as expected