\u3000\u30 Zhongyan Technology Co.Ltd(003001) 30 Xgd Inc(300130) )
Event: the company released its annual report for 2021, realizing an operating revenue of 3.61 billion yuan, a year-on-year increase of 37.2%; The net profit attributable to the parent company was 200 million yuan, a year-on-year increase of 132.0%. China’s payment service industry has gradually warmed up, the demand of overseas market has expanded, and the company’s annual performance has increased rapidly.
Preferential policies for the epidemic affect the gross profit margin, which is expected to be significantly improved in the follow-up and bring profit elasticity. Within two years after the outbreak, Jialian payment, a subsidiary of the company, actively responded to the call of the government, supported the recovery of offline merchants, and carried out procedures reduction and new subsidies for acquiring and value-added services. In 2021, the gross profit margin of the company’s acquiring and value-added services was 17.6%, a year-on-year decrease of 6.36pp, resulting in a decrease in the overall gross profit margin of the company by 5.20pp to 21.8%. In addition, the company’s expense side was well controlled, with the sales expense rate / management expense rate / R & D expense rate of 5.5% (- 0.43pp) / 5.5% (- 1.12pp) / 6.8% (- 1.41%) respectively, boosting the company’s net profit margin to 5.56%, a year-on-year increase of 2.27pp and a significant improvement in profitability. We believe that with the gradual recovery of the epidemic and the weakening of subsidies, the company’s gross profit margin is expected to recover significantly, and the profit side has great flexibility.
The promotion of digital currency superimposed on digital transformation is accelerated, and the demand for stock updating of intelligent payment terminals has a broad market. In terms of business, during the reporting period, the company’s intelligent terminal business (electronic payment products + biometric products) achieved a revenue of 1.03 billion yuan, a year-on-year increase of 16.5%; Revenue from receipts and value-added services reached 2.37 billion yuan, a year-on-year increase of 44.7%, and the overall performance was good. With the acceleration of the pilot of digital RMB, the payment scenario and the way to enter the scenario will gradually develop to diversification and complexity. China’s existing stock payment terminals will face comprehensive upgrading, iteration and transformation. The company has preliminarily completed the technical reserves required for the new generation of POS machines and “hard wallets” and other products, and actively cooperated with banking institutions to assist the transformation of merchant terminals and the landing of scenarios, which is expected to continue to benefit in the future.
The overseas business expanded rapidly, and the newly obtained European acquiring license opened up room for growth. In 2021, the company’s overseas business achieved brilliant performance, with a revenue of 540 million yuan, a year-on-year increase of 88.3%, a year-on-year increase of 96.8% in shipments, and an increase in the proportion of revenue to 15.1%. According to Nielsen’s report, in 2020, the shipment volume of Xgd Inc(300130) pos machines ranked 10th in the world with a market share of 4.25%, and now the leading advantage may be further expanded. In addition, in March 2022, the subsidiary Xgd Inc(300130) Europe has been approved to grant the operation license of payment institution and has completed the registration procedure. Subsequently, it can carry out merchant acquiring service in the EU. In the long run, the company is expected to use the successful experience of China’s acquiring business to accelerate the layout of overseas business and open up new growth space.
Profit forecast and investment suggestions. It is estimated that the compound growth rate of the company’s net profit attributable to the parent company from 2022 to 2024 will reach 47.69%. Relying on the whole industrial chain layout in the electronic payment industry, the company is expected to continue to enjoy the iterative transformation bonus brought by the promotion of digital RMB; Superimposed company has newly obtained the acquiring business license in the European market. In the future, overseas business is expected to accelerate growth and improve profit quality. In addition, the company’s gross profit margin was greatly impacted by the epidemic in the first two years. With the subsequent adjustment of subsidy and preferential policies, the gross profit margin is expected to be significantly improved and has greater profit elasticity. Therefore, the company is given 33 times PE in 2022, corresponding to the target price of 22.11 yuan, and the “buy” rating is given for the first time.
Risk tip: the epidemic situation repeatedly affects the gross profit margin of acquiring business; The promotion of digital RMB is less than expected; Overseas business expansion is less than expected; Competition in the payment terminal industry has intensified.
