Incidents: The first half of 2016 achieved operating income of 346 million yuan, a year-on-year decrease of 9.25%; operating profit of 18.17 million yuan, a decrease of 57% over the previous year; and Guimu's net profit was 288.332 million yuan, a decrease of 51.89% over the previous year, in line with previous performance forecasts.
The decline in revenue and rising expenses dragged down performance: the company achieved revenue and net profit of 346 million yuan and 28.83 million yuan respectively in the first half of 2016, down 9.25% and 51.9% from the previous year. On the one hand, the number of payments for the company's USB-KEY and dynamic token products declined compared to the same period last year, leading to a decline in revenue; on the other hand, the company's management expenses increased significantly. Management expenses in the first half of the year were 98.4 million yuan, an increase of 22% over the previous year, an increase of nearly 7 percentage points over the same period last year, of which employee remuneration was 14.26 million yuan , an increase of 70% over the previous year. However, we also found that the company increased its sales efforts during the reporting period, with accounts receivable of 127 million yuan at the end of the first half of the year, an increase of 160% over the beginning of the year.
The smart card business is one of the highlights of the future: in addition to traditional USB-KEY and dynamic token cards, the company also signed a cooperation agreement with Disney in 2015, becoming the only domestic card dealer that can use Disney prototypes such as Winnie the Pooh, Frozen, etc., and classic Marvel images as transportation card design elements. Licensed products include public transportation smart cards, small figures with built-in smart chips or integrated circuits, card packs/card holders with built-in smart chips or integrated circuits. We think the company's layout in the smart card field is expected to expand sales of payment products and supporting products in the public transportation sector Scale to improve sales performance.
Relying on “blockchain” to set sail: “Blockchain” technology has recently ushered in an investment trend in the global market. Its advantages such as decentralization, distribution and security make it have great potential in artificial intelligence, big data, and Fintech; and the company has extensive experience in the fields of identity authentication, software protection, etc. In June 2016, the company announced that it has now been developed in the field of virtual currency hardware wallet products. This product is a secure storage device for blockchain virtual currency. It is a terminal auxiliary product in the blockchain industry chain. We think this product is also the most advanced at this stage With products that have practical significance, the company is expected to set sail on the “blockchain” trend.
The investment proposal estimates that the company's EPS after dilution in 2016-2018 will be 0.49 yuan, 0.54 yuan and 0.58 yuan respectively. In 2017, the company was given 65 times the PE valuation. The target price was 35.1 yuan, covering the “increase in holdings - A” rating for the first time.
Risk warning: smart card business promotion falls short of expectations; blockchain technology research and development progress falls short of expectations