Summary of the report:

The domestic RFID industry is developing rapidly: at present, the Internet is evolving from a tool to an infrastructure, the trend of the Internet of everything is irresistible, RFID as the tactile nerve of the Internet of things, the industry ushered in the opportunity for great development. At present, the domestic RFID market exceeds 30 billion, with a compound growth rate of more than 30% in the past five years, and the domestic market is developing at a high speed. The company is the leading RFID company in China, but it encountered bottlenecks due to the problems of actual controllers in 2013 and 2014. now the internal management is gradually straightened out, team morale is restored again, and the development bottleneck is expected to be broken.

There is a lot of room for tapping the endogenous growth potential: the company's endogenous growth potential comes from two aspects: 1, the improvement of self-management, the reduction of profit leakage and the decline of expenses, which is about 48 million. 2, each business line moves forward: the railway business is expected to grow steadily, the library and international retail business will become the support of short-term performance growth, and look forward to the outbreak of other markets such as tobacco and alcohol in the future. 3, big data and other value-added services need to be broken.

Epitaxial expansion is expected to accelerate again. The two-way development of endogenesis and extension is the established strategy of the company. In the RFID application market, the barrier lies in the industry experience, but there are great differences among the subdivided industries. It takes a long time and high cost to expand solely on its own. Extension has become a good choice for many leading enterprises in the industry. From the perspective of overseas mature markets, RFID giants such as Checkpoint also choose to expand their application fields through extension, so as to develop and grow. After going public in 2007, the company began to open up new markets with the help of the capital market. After several years of preparation, the extension expansion entered an accelerated stage in 2011 and 2012, and then was subject to the problem of actual controllers. In the past two years, the expansion slowed sharply, and after the actual controller problem was solved, the company's extension expansion is expected to accelerate again.

Profit forecast and investment rating: the company's net profit from 2015 to 2017 is expected to be 99 million, 132 million and 150 million respectively, up 114% and 14.3% year-on-year, respectively. 2015 was the turning point for the company, and the Internet of things industry entered a period of rapid growth under the guidance of Internet + and Industry 4.0, so it was given a "overweight" rating.

Risk tip: slow progress in new market expansion; management improvement is not as good as expected