Event: the company reported semi-annual income of 346 million yuan in the first half of 2016, down 9% from the same period last year; net profit from its mother was 29 million yuan, down 52% from the same period last year; and the comprehensive gross profit margin was 42.79%, up 5.67% from the same period last year.
Traditional business is under pressure, with revenue and profits falling compared with the same period last year. The company's traditional business customers are mainly banks. After years of rapid growth, online banking products such as USB Key and OTP tend to be saturated, and banks' demand for the company's products begins to decline. Coupled with the fierce competition in the market, there is a certain pressure on the performance.
The increase in USB key gross profit margin in the first half of the year is mainly due to product differences and reduced procurement costs of raw materials.
Cooperate with Bubby area on blockchain technology. The company formally reached a strategic cooperation with Bubby Network Technology Co., Ltd. in the field of blockchain technology. In the future, the two sides will carry out extensive cooperation in the field of blockchain core technology products, identity authentication and private key protection. Bubby is a leading blockchain technology company in China. The team engaged in the research of network trust technology in 2012 and implemented the research and development of blockchain technology and system in 2014. In December 2015, the first commercial application case of blockchain in China was launched on the Bubby blockchain platform. Bubby blockchain has been used in digital assets, supply chain traceability, business points, joint credit information, public notarization, data security and other fields, and is carrying out application testing with exchanges, banks and other financial institutions.
Research and development of virtual currency wallets will be launched this year. The blockchain-related product that the company is currently developing is the virtual currency hardware wallet. This product is the safe storage device of virtual currency in blockchain, and it belongs to the terminal auxiliary product in blockchain industry chain. It will be launched this year, which lays the first step for the company in the process of expanding the application of blockchain technology.
Investment suggestion: we believe that the company continues to strengthen the layout of the block chain, and the company has the gene of secure encryption technology, which is expected to resonate with the block chain technology. In the case of the research and development of internal blockchain technology, in cooperation with Bubby, the future extension trend of the company in the block chain is worthy of attention. It is estimated that the company's net profit growth rate from 2016 to 2018 is 3%, 18% and 21% respectively, and the pencil EPS is 0.45,0.53 and 0.64 yuan respectively. For the first time, coverage gives a "buy" rating.
Risk hint: the uncertainty of the development prospect of blockchain technology.