Key points of investment
Comprehensive layout along the electronic payment industry chain
The company was founded in 2001 and has been deeply involved in the electronic payment industry for many years. It has formed a comprehensive industrial chain layout of POS machines+billing+value-added services+technology, and has collaborative advantages. Electronic payment devices (mainly POS machines) are the cornerstone business, and POS machines are the core devices that implement the billing function. 5.17 million units were shipped in 2023, of which overseas shipments accounted for 86%, achieving revenue of 993 million yuan, accounting for 26% of total revenue. Receipt and value-added services are the main sources of the company's revenue and profit. In 2023, they accounted for 68% of revenue and 60% of gross profit. Focusing on biometrics (face recognition, fingerprint recognition) and artificial intelligence technology used in receipt of invoices, the company's business extends to the field of biometric devices and audit services.
Overseas business: Equipment penetrates into the high-end market, and the receipt business has landed in European merchants
The company follows the “equipment first, bill later” route when going overseas. The company began selling equipment overseas in 2009. In 2021-2023, against the backdrop of increased domestic competition and rapid growth in overseas markets, the company shifted its focus on electronic payment devices from domestic to overseas, and the share of overseas equipment shipments increased from 16% to 86%.
There are licenses and barriers to local operations to develop overseas billing business. The company currently has cross-border billing capabilities and local EU billing capabilities. Among them, the company obtained the Luxembourg PI license in 2021, enabling the company to carry out billing business throughout the EU market. The company's billing business has already been implemented in some European merchants, constituting a first-mover advantage. In the field of cross-border payments, the company obtained a US MSB license and a Hong Kong MSO license, so that the company can help overseas companies solve cross-border payment and collection issues.
Overseas billing rates are higher than domestic billing rates, and the outlook is promising. The rate charged by the leading company Adyen in Europe can reach 0.6%-0.8% of the invoice amount, while the company's domestic billing rate is only about 0.1%.
Domestic billing: Improving the industry environment+increasing value-added services. Domestic billing institutions have cleared the industry due to stricter regulations, the competitive landscape has been optimized, and various manufacturers have raised billing rates. Payment rates for New Capital, New Continent, and La Cala all increased markedly in 2023. Among them, the new capital rate was raised from 0.119% to 0.133%. Considering rising costs due to regulation and elimination of illegal profit margins, rate increases are expected to continue.
The company enhances customer stickiness and service value through value-added services. As an important entry point for commercial operation data, the billing scenario can use accumulated data to provide customers with value-added services, help merchants achieve digital operations, reduce costs and increase efficiency. Currently, the subsidiary Jialian Pay provides users with solutions integrating payment and value-added services through the “payment+scenario service+marketing management+customer conversion” service system based on the SaaS model. It has formed ten major scenarios covering retail, education, catering, medicine, hotels, bars, leisure, property, parking, and refueling.
Profit forecasting and valuation
The company's revenue is expected to reach 40.94, 46.11, and 5.388 billion yuan in 2024-2026, with year-on-year growth rates of +7.70%, +12.64%, and +16.85%; net profit to mother is 8.69, 10.27, and 1,245 billion yuan, respectively, with year-on-year growth rates of +15.06%, +18.20%, and +21.22%. Referring to the valuation level of comparable companies, the company was given 16 times PE in 2024, corresponding to a target market value of 13.9 billion yuan and a corresponding target price of 24.76 yuan. First coverage, giving a “buy” rating.
Risk warning
Policy uncertainty, risk of changes in overseas business environment, market competition risk, technology risk