Main points of investment:
The company has established the light asset transformation blind box IP operation, and comprehensively entered the emerging consumption of trendy culture. At present, the company's main products are high-end digital metal tubesheet laser processing equipment, non-metallic industrial flexible material laser processing equipment, and all kinds of intelligent retail terminals. The gradual transformation of the company, first with intelligent retail terminals (blind box vending machines) into the blind box industry. At the beginning of 2020, it opened the prelude to enter the tide play blind box industry in an all-round way by signing the "Framework Cooperation Agreement" with Tencent, the IP business of hosting doll No. 1 and Hangzhou lakeside mileage investment.
IP station has gathered many well-known IP, ready to start. Established in 2016, IP is owned by listed companies and provides software and hardware solutions to supply blind box vending machines and three-dimensional digital technology. In 2017, the company invested another 5 per cent in Doll one (which owns IP). IP has cooperated with more than 30 Chinese and foreign well-known IP suppliers, including Hasbro, Walt Disney Company, Dream City, Beijing Yingzhouzi, to introduce more than 700 kinds of IP derivatives, and now has launched popular blind boxes such as "Ali", "Crayon Xiaoxin", "Cat and Mouse" and "Luo Xiaohei". With the cooperation between the company and Tencent, we will also actively create a blind box with QQ Pet as the sample. At the same time, the company also has the exclusive rights of the offline vending machine channel of Japanese super popular doll Sonny Angel in China.
Online and offline synchronous propulsion, with the goal of 350 million pan-quadratic population. Blind box is a kind of hand-held and toys with strong stickiness and collectible consumption attributes. Most of the players are post-90s adults, and 75% of them are women. The potential user base is 350 million of pan-quadratic users. Its business model is: 1) online sales, Tmall is the main channel; 2) offline sales, with brand stores, stationery and gift shops, blind box vending machines as the main channels. Pop Mart International (PopMart) once listed in the new third board, as the industry leader. The company's IP station is a rapidly rising new type of player.
Strong stickiness optional consumption recovers quickly. During the outbreak of the new coronavirus, the required consumption data, represented by food, showed a strong performance, and optional consumption began to recover in March. The company's offline blind box vending machine is short-term affected by the decline in the flow of people in the core business district and is expected to gradually recover in April. At the same time, the company will quickly launch the laying of new vending machines. We believe that the blind box is a strongly sticky alternative consumption, heavy players can continue to spend online, and offline consumption will recover quickly.
In order to break the offline physical space restrictions, online celebrity marketing in cooperation with MCN will be the trend in the future.
Cover for the first time and give a buy rating. The company's traditional laser business remains stable, the blind box business develops rapidly, and the accelerated channel laying contributes to the performance in 2020. We estimate that the company's net profit from 2019 to 2021 is 16.59 million, 194 million, 479 million, corresponding to EPS 0.13,1.54,3.8yuan, corresponding to PE 349X, 29x, 12x. We believe that the company's laser business will not grow in the future. We value the company's laser business at 20 times PE in 2020, and the blind box business at 38 times PE based on the average valuation of comparable companies. Based on the comprehensive calculation, we think that the reasonable market value of the company is 7 billion yuan, which is 22% higher than the current market value. With a long-term large space and high growth perspective, the company has a huge long-term space and gives a buy rating for the first time.
Risk hint: offline blind box vending machine can not be laid on time and quantity; IP development and operation is not up to expectations.