The company is a leading domestic POS machine manufacturer and payment collection agency.

The company's main business is divided into two segments: smart terminal clusters and industry digital clusters.

The smart terminal cluster includes the production and sale of POS machines. In 2023, according to the Nielsen Report, the New World ranked first in the world for payments in global shipments.

Industry digital clusters, including merchant operations and value-added service businesses. The total transaction volume of the company's payment service business in 2023 exceeded 2.5 billion yuan, leading the industry.

The profitability of the payment business has improved, and consumer stimulus policies may have a positive impact.

In 2023, benefiting from a recovery in consumption, the payment flow level increased 8% year on year, merchant operating and value-added service revenue increased by 33.6%, and the net rate (calculating net profit/payment turnover of a subsidiary of Guotong Xingyi) increased to 24,000. This means an overall increase in turnover, rates, profitability, etc.

Although 2024H1 has declined in payment flows, with the introduction of various policies to promote consumption, it may have a positive effect on offline consumption, driving the company's merchant operations and value-added service business to recover.

Overseas strategies continue to advance, boosting overall gross profit margin

The company's share of overseas business revenue continues to rise. With 2024H1, overseas business revenue has reached 32%, and gross margin has reached 44.7%, which is significantly higher than domestic business. In the future, the company will continue to promote overseas strategies, further cultivate Latin America, an advantageous region, and continue to explore Mexico, Argentina and other regions in addition to maintaining good growth in Brazil.

Investment advice

The company is expected to achieve net profit of 1.24 billion yuan, 1.5 billion yuan, and 1.85 billion yuan from 2024 to 2026, an increase of 24.0%, 20.7% and 23.1% year-on-year. The PE corresponding to the current market value is 12 times, 10 times, and 8 times, respectively. We believe that the current introduction of various policies to promote the economy and support consumption is expected to drive the growth of the company's payment business; at the same time, the company's current valuation is low, and there is room for upward recovery. First coverage, giving a “buy” rating.

Risk warning

The recovery in offline consumption fell short of expectations; stricter regulatory policies by regulators such as the People's Bank of China; and increased competition in the industry due to factors such as the liberalization of third-party payment licenses.