Incident: The company and Yuanmao foreign service acquired 65% of Jiangmen Technology's shares. On November 15, Shanghai Foreign Service and Shanghai Foreign Service Yuanmao signed a controlling interest acquisition agreement for Nanjing Jiangmen Information Technology Co., Ltd. to acquire 65% of its shares.
Expanding the IT outsourcing service product line and enhancing market competitiveness: Jiangmen Technology is an innovative high-tech enterprise that provides digital technology services and IT business outsourcing services to large state-owned enterprises in the communication information, power and energy, aerospace and aviation industries. Currently, it has more than 50 software copyrights and 5 patents, covering the Internet of Things and communication technology. Jiangmen Technology has 11 branches to develop markets in Beijing, Guangzhou, Shenzhen, Xi'an, Chongqing, Shijiazhuang, Jinan, Yunnan, Wuhan, Chengdu and other regions. The acquisition has effectively expanded the company's IT outsourcing service product line and further accelerated the company's business layout in high-tech industries such as the communications industry, power and energy, aviation and aerospace through complementary business models. In 2023H1, Jiangmen Technology achieved revenue of 163 million yuan, +11.37% year-on-year; net profit of the mother was 16 million yuan, +54.20% year-on-year.
People's service leaders accelerate capital mergers and acquisitions and enhance business collaboration capabilities: The Ministry of Human Resources and Social Affairs's “Human Resources Service Industry Innovation and Development Action Plan (2023-2025)” proposes to strengthen and improve leading enterprises and support leading enterprises to adjust and optimize the market structure through mergers, acquisitions, restructuring, alliances, and financing. This transaction is one of the biggest acquisitions in the history of the domestic information technology outsourcing industry. It is also another major successful practice of Shanghai Foreign Service to drive development through capitalization after successfully acquiring Yuanmao shares. 2023H1, the initial synergy between the company and OFU Yuanmao was evident, attracting 29 new customers through OSS. In 2023H1, Outbound Yuanmao achieved net profit of 33 million yuan, +22.92% over the same period last year.
Investment advice: Foreign Service Holdings has been deeply involved in the domestic human service industry for nearly 40 years, providing one-stop human resources services. The company's business network covers the whole country, strong capital strength, and obvious comprehensive advantages. In the company's traditional business, personnel management and talent dispatch contribute steadily to cash flow; in emerging businesses, high growth in business outsourcing, flexible employment, etc., opens up room for growth. We expect the company to achieve net profit of 639/7.32/837 million yuan in 2023-2025, corresponding to the current PE valuation of 19x/16/14x, respectively, maintaining the “increase in holdings” rating.
Risk warning: Market competition is fierce, the recovery in employment demand falls short of expectations, and policy supervision is becoming stricter.