Report summary
Company Overview
Heng Wan Technology is an SD-WAN router vendor. According to Quocirca reports, the company was the fifth largest SD-WAN router provider in the world by value of revenue in 2015.
The company's main product is SD-WAN routers, which are divided into wired and wireless routers, which accounted for 32%/48.9% of 2015 revenue respectively. A wired router can connect multiple devices and end user networks to the Internet through multiple WAN connections. Wireless routers include the Max BR series and the MAXHD series. Most SD-WAN routers can take advantage of SpeedFusion, the company's proprietary technology. In addition, the company also provided warranty and support services and software licenses, which accounted for 17.8%/1.3% of 2015 revenue, respectively. Warranty and support services include included warranties and additional warranties and support. Software license revenue mainly refers to license fees for SpeedFusion and InControl.
The company's revenue for 2013-2015 was 13.31/17.95/21.86 million dollars, respectively, with a compound annual growth rate of about 28.2%. The 2013-2015 profit was 2.57/3.74/3.36 (million US dollars), respectively, and the compound annual growth rate was 14.3%. The decline in profit in 2015 was mainly due to changes in pricing strategies and product structures, which led to a decline in overall gross margin and an increase in listing expenses and business expansion expenses.
Looking at geographical distribution, the company's 2013 revenue came mainly from North America, which accounted for about 47.4% of total revenue. The company strategically expanded to the EMEA and Asian markets to reduce its reliance on the North American market. The North American, EMEA, and Asian markets accounted for 42%/33.6%/21.4% of total revenue in 2015, respectively.
Status and prospects of the industry
It is estimated that global SD-WAN router sales in terms of revenue value will increase to $1.51 billion by 2020E, accounting for 38.0% of global enterprise router sales. The 2015-2020E CAGR will reach 31.8%. Key growth drivers include growth in commercial Internet traffic, increasing mobility supported by SD-WAN, and continued development of new communication technologies.
Advantages and opportunities
Strong R & D capabilities.
An extensive global distribution network.
Close customer relationships.
Weaknesses and Risks
Dependence on a limited number of suppliers may result in supply disruptions.
It is susceptible to changes in new industry standards, policies and regulations, and the entry of competitors with new technology.
Susceptible to foreign currency fluctuations.
valuations
Based on the prospectus price of HK$0.45-0.65, the company's historical price-earnings ratio in 2015 was 17-25 times. Judging from the company's industry and valuation, it was not particularly attractive and gave an IPO rating of 5.