Foreign service holding ( Shanghai Foreign Service Holding Group Co.Ltd(600662) )
Comprehensive leader of Chinese people’s clothing industry. For nearly 40 years, it has been deeply engaged in the human services industry, with more than 470 service outlets covering the whole country. It mainly carries out five business sectors: personnel management, talent dispatch, salary and welfare, recruitment and flexible employment, and business outsourcing. Shanghai SASAC is the actual controller of the company. From 2019 to 2021, the growth rate of net profit attributable to the parent company was 4.28%, 6.15% and 7.44% respectively, and the net interest rate attributable to the parent company was 4.6% in 2021. In terms of region, the company is based in Shanghai and makes great efforts in the national market. The contribution of regions outside Shanghai to revenue increased from 21% in 2017 to 32% in 2020; In terms of business lines, the growth rate of traditional main businesses such as talent dispatch slowed down, but the scale effect of personnel management business showed that the gross profit margin increased day by day. On the other hand, the acceleration of emerging businesses such as flexible employment and business outsourcing is expected to open up new growth space for the company.
Policy support + talent gap support the vigorous development of the industry, and emerging businesses such as flexible employment bring new development opportunities. 1) In the central and eastern regions, there is a strong demand for service & Technical Talents: the supporting policies of the human resources industry continue to be released, the vigorous development of the tertiary industry promotes the reform of China’s talent industry, the prosperity of the service industry, blue collar, sales and technical jobs in the central and eastern regions continues to be high, and there are still great structural development opportunities in the human services market. 2) The industry concentration is low, and the Digitalization & specialization is expected to break the situation and form a scale effect: limited by the operation mode of the people’s service industry, the dependence on people is high, the entry threshold is low, and the industry concentration is low. The market participants are mainly small and medium-sized enterprises serving a single region and single business, while the number of comprehensive large enterprises with national service network and multi business lines is small. At present, the main participants include Shanghai foreign service, Zhongzhi Foreign enterprises in Beijing; 3) Flexible employment, business outsourcing and salary tax management still have room for development: after the implementation of the social security tax policy, higher requirements are put forward for the business professionalism of salary tax management. After the implementation of the new individual income tax policy, the original salary and welfare system of enterprises also needs to be re planned to promote the gradual increase in the proportion of enterprises that use third parties for salary and welfare payment. It is expected that the salary and welfare business will have strong growth; Considering the continuous expansion of the talent gap in China’s labor market, the cost reduction and efficiency increase of flexible employment, the advantage of flexibility, and the large gap between China’s flexible employment proportion / outsourcing service penetration and the world, we believe that China’s flexible employment market is also in rapid development.
Senior industry experience + rich customer resources + National Service Network + comprehensive service ability to continuously tap the needs of new and old customers; Sufficient capital + M & a development willingness, and leapfrog expansion can be expected. 1) Senior business experience and rich customer resources: the company’s senior management and core business backbone have senior industry experience. According to the announcement, by the end of 2020, the company has accumulated 47000 enterprise customers, mainly foreign-funded enterprises, followed by private enterprises, and the proportion is increasing day by day. 2) With high customer stickiness and the service capacity of various human resources projects, the improvement of comprehensive procurement has great development potential: considering that the services of the human services industry are customized to a certain extent, once the supplier is determined, the cooperation is good and will not be changed easily, the customer turnover rate of the company has not exceeded 20% since 2017 (considering that some customers have occasional needs such as Festival welfare products). A solid customer base, in coordination with the company’s layout of national service outlets and the comprehensive service capacity of five business lines, provides new opportunities for the company to deeply tap the comprehensive business needs of new and old customers. 3) M & a leapfrog development can be expected: against the leading development path of global human resources, M & A is an important development means. The company uses sufficient self owned funds and capital market resources, and is expected to promote the leapfrog development of emerging businesses through M & A of high-quality human services enterprises.
Investment suggestion: Buy-A investment rating, 6-month target price of 7.00 yuan. As a leading enterprise in China’s human resources industry, the company has profound industry experience, rich customer resources and business layout across the country. After listing, the company intends to increase the development of emerging businesses such as flexible employment and business outsourcing. At the same time, it does not rule out accelerating expansion by means of M & A. on the basis of maintaining traditional advantageous business lines such as human dispatch, it is expected to open new performance growth points, The investment in digital transformation is also expected to help improve the overall operation efficiency of the company. We estimate that the net profit of the company from 2022 to 2023 will be 640 million yuan and 710 million yuan respectively, with the corresponding growth rate of 19.9% and 12.0%. 25xpe will be given in 2022, with the corresponding total market value of 15.9 billion yuan and the target price of 700 yuan.
Risk tips: macroeconomic fluctuation risk, increased industry competition risk, covid-19 epidemic impact exceeding the expected risk
