The leader in the field of digital payment, technological precipitation + vertical mergers and acquisitions to form the layout of the whole industry chain New Continental is the world's leading provider of intelligent payment solutions, mainly engaged in intelligent identification terminals, pipelined order collection and merchant value-added services, as well as digital software business. After years of extension and extension, the company has formed a complete intelligent payment industry chain layout of "terminal-order-service-platform", and has formed a relatively complete marketing network layout and local deployment in various regions of the world. In 2022, the company's revenue was 7.37 billion yuan, and its five-year CAGR was 5.5%. In the past five years, the gross profit margin remained around 26%, and the net profit margin remained between 7-10%.
The internationalization strategy has entered the harvest period, and the terminal business continues to grow. Since 2003, the company has started its overseas layout and accelerated the local deployment of overseas markets in recent years. In 2022, the company's overseas revenue reached 2.073 billion yuan, and its five-year CAGR reached 59.77%. In the future, overseas markets still have great potential for development: 1) there is still room for penetration in Latin America and Africa: according to the FIS Global payments report 2022, the proportion of offline payments using cash in the Middle East, Africa and Latin America will reach 44% and 36% respectively in 2021, and there is still much room for penetration in non-cash payments, and the market will be further expanded. 2) New requirements for intelligent updating and upgrading: with the rise of mobile payments and third-party payments, the degree of intelligence of POS machines is improved, bringing demand for upgrading. At present, the global mobile payment POS penetration rate is still low. According to Statista data, the global mobile POS payment penetration rate in 2022 is less than 25% except China, Vietnam and South Korea. The company has succeeded in Latin America and Central and East Africa with low penetration. According to Nielsen data, the company is the top three shippers in the region in 2021 and is expected to continue to benefit from the rapid development of overseas markets in the future.
The demand of receiving business is picking up, and the clearing of the industry brings rate flexibility.
The company's order collection business is mainly for offline payment of the cost share of the receipt. At present, both supply and demand in the industry have ushered in marginal changes. On the demand side, due to the influence of the external environment last year, the flow scale of the company in 2022 was 2.4 trillion, down 4% from the same period last year, and the premium rate was 0.093%, down 1.9pcts from the same period last year.
When frontline consumption gradually picks up, retail sales of consumer goods totaled 15.05 trillion yuan in the first half of 2023, an increase of 10.67% over the same period last year. On the supply side, the supervision of the payment industry has become stricter, and bank card receipt licenses have continued to shrink. As of the renewal of the "payment Business license" of the central bank's non-bank payment institutions (the sixth batch in July 2023), only 33 companies have bank card receipt licenses, a decrease of 29 in eight years. With the recovery of the comprehensive demand side and the continuous optimization of the competition pattern in the industry, we believe that the company's collection rates will enter the upward cycle in the future.
In cooperation with the large model of the Chinese Academy of Sciences, the active layout of intelligent AI is one of the partners of the large model of Zidong Taichu of the Chinese Academy of Sciences, which has great advantages in image algorithm, vertical data accumulation and cloud edge cooperation. at present, it has realized the application of perceptual AI and cognitive AI. 1) in terms of perceptual AI, the company optimizes the vertical scene through extraction, distillation and pruning based on the massive data of the large model to form a small model for vertical scene application; it has been applied to the China Tower Corporation project and has been selected as the second algorithm in quantity and the first in quality. In addition, the company focuses on the direction of machine vision and biometric recognition, and the scene has great potential. 2) in terms of cognitive AI, the company focuses on the exploration of digital RMB intelligent contracts. AI is expected to enable smart contracts to improve delivery flexibility, scene scalability, efficiency, accuracy and security, enhance the intelligent degree of intelligent contracts, and contribute to the construction of digital currency ecology.
Investment advice:
The company is the world's leading provider of intelligent payment solutions, with a complete layout of the industrial chain. In the short term, the gradual recovery of domestic consumption and capacity clearing promote the company's order collection business to improve, bringing rate flexibility. In the medium and long term, with the improvement of the penetration rate of intelligent POS in overseas areas, it will bring continuous growth for the company's electronic payment terminal business. In addition, the company's AI field cooperates with the Zidong Taichu multimodal large model of the Chinese Academy of Sciences, with broad application scenarios and promising prospects. We estimate that the company's operating income from 2023 to 2025 will be 87.24 million, 106.10 billion, respectively, and the net profit of return to the mother will be 9.60 million, 1.302 billion, respectively. For the first time, it has an investment rating of Buy-A, with a six-month target price of 23.30 yuan, equivalent to a dynamic price-to-earnings ratio of 25 times in 2023.
Risk hints: macroeconomic risks, overseas market risks, industry policy risks, intensified market competition, and the development of digital RMB is not as expected.