Investment highlight
Cover Shengye for the first time (06069) to rate the outperforming industry, with a target price of HK $7.30 (based on 22x2023e pact E). Founded in December 2013, Shengye is China's leading supply chain financial technology platform, providing digital finance and industrial Internet services. The reasons are as follows:
Shengye is a leading supply chain financial technology platform. According to Frost & Sullivan, according to the business volume in 2019, the company's market share in domestic third-party business factoring is ~ 5.9%, which is in the leading position in the industry: 1) the company focuses on the three major industries of construction, energy and medicine, and has high growth potential. At the same time, it mainly selects high-quality state-owned enterprises for cooperation, and the business risk is relatively low. 2) relying on the self-developed technology platform and perfect risk control system, the company accurately captures the financing demand for assets in the uncertain supply chain and realizes the forward movement of the financing node. effectively enhance the value of all parties in the industrial chain; 3) the company cooperates with high-quality state-owned assets to establish a regional supply chain financial platform to further pry incremental funds through the output of technology and risk control capabilities to provide effective support for future business expansion.
The steady growth of enterprise accounts receivable supports the optimal development of business factoring. According to the statistics of the National Bureau of Statistics, the Special Committee of Bank factoring and the Special Committee of Commercial factoring, at the end of 2022, the accounts receivable of industrial enterprises above Chinese scale was ~ 22 trillion yuan (14-22 CAGR: 9.4%), the transaction volume of bank / commercial factoring market was 3.6 trillion yuan in 2021, and the compound growth rate in 17-21 years was 13%.
Business factoring is mainly divided into group subsidiaries and third-party factoring. under the relevant regulatory requirements and the trend of digital transformation, we believe that third-party business factoring has certain advantages in terms of business flexibility and scientific and technological capabilities. it is beneficial to the long-term development of leading financial technology factoring providers such as Shengye.
The dual-driven development of digital finance and industrial Internet is expected to bring business increment. The early business of the company is mainly commercial factoring, and now it has gradually transformed to the light asset model of linking funds and assets. At the same time, with a deep understanding of the three major construction / energy / pharmaceutical industries, the company relies on cutting-edge technology to provide customers with industrial Internet solutions based on intelligent construction site and hospital SPD supply chain management. We believe that the cross-empowerment of digital finance and industrial Internet business can form a synergistic effect and build an efficient supply chain smart service ecosystem. While improving the stickiness of customers' original digital financial services, it is also expected to bring more business increments to the company after the product side gradually matures.
What is the biggest difference between us and the market? We are optimistic about the potential growth space of third-party commercial factoring released by the accelerated demand for supply chain financing and the unique advantages of the company compared with traditional factoring.
Potential catalysts: accelerated business growth and Pratt & Whitney matchmaking and industrial Internet business development exceeded expectations.
Profit forecast and valuation
We estimate that the company's EPS of 2022, 2023, and 2024 will be 0.23, 0.30, 0.36 and 26%, respectively, of CAGR in 2024. The company is currently trading on 18.7x/15.1x 2023e/2024e Pamp E. For the first time, Shengye is rated as an outperform industry, with a target price of HK $7.3 (based on 22x 2023e Ppace E), with 12% upside space.
Risk.
The growth of financial assets in the supply chain is less than expected; the regulatory policy is stricter; and the asset quality fluctuates greatly.