Investment logic

It is proposed to acquire a comprehensive information certification service provider to enter the application field of big data. Guozheng is mainly engaged in multi-data source fraud prevention business, and establishes a fraud prevention service platform by integrating authoritative data resources such as citizenship, education, industrial and commercial enterprise information, etc. to provide information authentication services for financial, communications, Internet and other industries and government agencies, the top five customers include China Mobile Limited, China Unicom, JD.com Group, Pudong Development Bank and so on. In 2016, Guozheng achieved an operating income of 291 million yuan, an increase of 11% over the same period last year, and a net profit of 78.64 million yuan, an increase of 31% over the same period last year. Hua Ming Intelligence plans to issue shares and pay cash at a price of 1.665 billion yuan, acquire 90% of the shares of Guozhengtong, and promise that the net profit after deducting it from 2017 to 2019 will not be less than 85.45 million yuan, 125 million yuan and 156 million yuan.

Build a multi-data source verification platform to connect authoritative data and information demand side. Guozhengtong has set up an integrated business platform to provide customers with multi-source fraud prevention services. Service mode: (1) the customer first sends the standardization requirements of Jingguo Zhengtong through the integrated business platform; (2) the platform connects the data source service provider through a specific dedicated line and interface, and the data source service side feedback the corresponding results to the platform according to the cooperation agreement signed with Guozhengtong in advance; (3) the feedback results form service results on the platform in the form of data tags such as "consistent" and "inconsistent". Profit model: (1) the company purchases and integrates authoritative data sources to provide customers with data verification services; (2) customers send information verification requirements to the Guozhengtong data platform for monthly or quarterly settlement.

Big data fraud prevention application scene continues to expand, Guozhengtong has a first-mover advantage. Multi-source fraud prevention service is the primary link to prevent fraud. China is still in its infancy. With the continuous increase of Internet application scenarios and the continuous promotion of network real name verification, the market demand is on the rise in the future. China's big data service market is worth 4.15 billion yuan in 2016, with a growth rate of more than 30 percent from 2017 to 2020. Guozheng entered the industry early, mastered a number of authoritative data source interfaces, such as public security identity information and higher education information, and estimated the company's market share in the entire big data industry by revenue scale of about 1.73%, and in the data service segment with a market share of 7%. In the first echelon of the industry.

Hua Ming intelligent main business: subway sales and ticket inspection equipment subdivision leader, benefit from the peak of rail transit development. Huaming Intelligent main business is automatic ticket sales and Inspection system (AFC) terminal equipment, the products are used in subway, tram and other urban rail transit fields, and extended to venues, scenic spots, intelligent buildings and other application scenarios. In the first three quarters of 2017, the company achieved revenue of 164 million yuan, an increase of 12% over the same period last year, and a net profit of 26.1 million, a drop of 33% over the same period last year, mainly due to the first finger B supply of Zhengzhou subway project, resulting in a decline in gross profit margin. The company has 9 orders with a reserve contract value of more than 20 million in the first half of the year, totaling 420 million yuan, and more orders are expected to recognize revenue in the fourth quarter. China's urban rail transit is expected to maintain rapid development during the 13th five-year Plan period, and its operating mileage is expected to exceed 8000 km in 2020, with an average annual compound growth rate of 17%. During the 13th five-year Plan period, the subway investment is expected to exceed 2 trillion yuan, corresponding to the market demand of 13 billion yuan for AFC equipment. Huaming Intelligence is the leader of domestic AFC equipment and is making great efforts to expand the second and third-tier market share. At present, there are sufficient orders on hand, and the main business is expected to maintain steady growth.

Profit forecast

According to the consolidated report of Guozhengtong in 2017, we predict that the company's main business income from 2018 to 2019 will be RMB 2.82 million, an increase of 32%, 167% and 25%, respectively, compared with the same period last year. The net profit of the parent company will be RMB 202, 254 million, an increase of 29%, 223%, 26% and 1.34 yuan, respectively, and the corresponding PE will be 1.74 yuan, respectively, as compared with 81-35-27.

Investment suggestion

We believe that the company is the leader of domestic AFC equipment, with abundant orders on hand, and the peak of rail transit operation mileage construction to ensure the growth of the main business; the proposed acquisition of Guozhentong is the first echelon enterprise in big data's trading field, with customers covering all domestic communications operators and most banks, and the application scene is expanding to Internet finance and other fields, which is in a period of rapid development. We maintain the company's "buy" rating, with a target price of 50-55 yuan for the next 6-12 months.

Risk hint

The risk of approval of the acquisition; the investment in urban rail construction is not up to expectations; the risk of increasing accounts receivable and inventory.