According to the interim results report of 2016, the company's operating income reached 293 million yuan in the first half of 2016, up 29.69 percent from the same period last year, and the net profit belonging to shareholders of listed companies was 45.47 million yuan, up 54.44 percent from the same period last year. In the first half of 2016, the company accurately grasped the opportunity of the concentrated outbreak of market demand for the main control chip of the financial terminal, actively expanded the market for industry cards such as resident health cards to achieve a significant increase in sales revenue, and at the same time continued to actively promote fine management and improve operating efficiency, which in turn led to a rapid increase in net profit.
Comments:
The domestic market industry card expansion, overseas market scale expansion: in the first half of 2016, the company's sales revenue in the domestic market increased by 6.6% compared with the same period last year. Under the circumstances that USBKey and financial IC cards could not effectively open up the market, the company made up for the lack of demand in the financial card field by virtue of the rapid expansion of the industry, including residents' health cards, and the gross profit margin remained stable. Although the overall scale of the overseas market is still limited, we can see the simultaneous rapid increase in sales revenue and gross profit margin, indicating that the company's expansion of overseas channels has achieved results. In the future, with the continuous increase in the attention of information security, the market for security chips still has a lot of room for growth.
The gross profit margin remained stable and the operating profit margin continued to grow: the company's gross profit margin in the first half of 2016 was 36.1%, up 1.6 percentage points from the same period last year. It can be seen that the company's gross profit margin in terms of regional distribution and product segmentation has achieved steady growth, which shows the company's effective control on the cost side. At the same time, the sales expense rate and management expense rate were 8.7% and 23.2% respectively, down 3.8 and 3.9 percentage points respectively from the same period last year. The continuous improvement of operating efficiency promoted the growth of net profit margin.
The R & D project continues to advance, and the security chip technology capability is effectively improved: in the financial IC card field, except for the certification of the bank card testing center and the national commercial password testing center in the domestic market, the company has again obtained the international EMVCo chip security certification and international recognition after 2013. At the same time, in the area of limited area communication (RCC) and trusted computing, the delivery and acceptance of related projects has been greatly promoted, and trusted computing also plays an important role in promoting national core algorithm standards. There is considerable market expansion space in the above industries.
Investment advice: we expect earnings per share from 2016 to 2018 to be 0.22 yuan, 0.31 yuan and 0.44 yuan respectively. The rate of return on net assets is 4.3%, 5.8% and 7.5% respectively, with a-A rating and a six-month target price of 21.70 yuan, equivalent to a dynamic price-to-earnings ratio of 98.6, 70.0 and 49.9 times from 2016 to 2018.
Risk tips: the progress of research and development of new products and solutions and the speed of market promotion are not as fast as expected; the intensification of market competition affects the profitability of the company.
