The operating index exceeded the guidance in the first quarter, and the core business line grew strongly.
In the first quarter of 2017, GMV reached 6.133 billion yuan, an increase of 57.8 percent over the same period last year, exceeding the 50 per cent growth guidance for the whole year, of which proprietary sales, third-party platform transactions and gravity financial service loans accounted for 52.5 per cent, 27.2 per cent and 20.3 per cent respectively, and revenue reached 3.2675 billion yuan, an increase of 34.7 per cent over the same period last year.
Gross profit margin remained stable at 8.2 per cent; profit attributable to Non-GAAP equity shareholders was 133.9 million yuan, up 33.6 per cent from a year earlier and exceeding the full-year growth guide of 30 per cent.
The driving force of endogenous growth is strong, and Gravity Financial Services has broad prospects for development.
As of March 31, 2017, the number of online trading customers reached 23,056, an increase of 98.9% over the same period last year. The company guides that the number of customers will continue to grow at a high speed of 80-100% for the whole year. The GMV of blue-chip customers per unit increased by 55% compared with the same period last year. The increased purchasing power of blue-chip customers and the increase in new customers for small and medium-sized enterprises will drive the company's GMV to continue strong endogenous growth. As of March 15, 2017, hard egg has attracted nearly 24000 Internet of things projects, and the company has built a complete artificial intelligence supply chain ecology, platform liquidity will be catalyzed, 2017Q1 hard egg GMV has reached 18%. Based on the advantages of its own supply chain resources, in addition to liquidity loan business and chattel loans, the company quickly grasped the rigid demand of overseas mergers and acquisitions of domestic listed companies restricted by foreign exchange controls, and launched M & A loan services in the first quarter. can accelerate the growth of Gravity Financial Services.
Short-term market turmoil does not hinder long-term business development. Large share buybacks demonstrate management confidence. On May 18, due to the negative impact of AAC Technologies Holdings Inc. 's short selling incident and the turmoil in US stocks, the TMT sector of Hong Kong stocks fell as a whole, and the company's share prices were also affected. On that day, the company applied to the Stock Exchange to announce its results in advance and launched a large share buyback. Yesterday alone, the company bought back 6 million shares, demonstrating the company's confidence in its performance and share price, and the company's share price was relatively stable. And the company said that in the future, it will continue to buy back based on its own judgment of internal value and market sentiment. We believe that the company's supply chain resources and platform advantages are difficult to replicate, e-commerce platform, hard egg and gravity gold service form an iron triangle model, the synergy effect is significant, while the ecosystem activity is enhanced, the monetization ability will also continue to enhance.
High-certainty performance growth will provide a safe cushion for share prices to rise, and potential share buybacks will continue to inject a boost into the market. As of the 18th close, the company's 2017 PE was only 18.8x, an all-time low. In the long run, as market sentiment gradually stabilizes, there is plenty of room to repair the company's valuation.
Target price of HK $15.80, maintaining the "buy" rating
We expect the adjusted net profit attributable to shareholders of the company from 2017 to 2019 to be RMB1.79 million, with a compound annual growth rate of 31%. To reiterate the "buy" rating, the target price is Rmb14.10 (HK $15.80), corresponding to the PE of the 2017 and 2018 30x/22x, which has 58 per cent room to rise from the current share price.
Risk hint: the market competition intensifies; the realization of hard eggs does not meet expectations.