Mobile payment: a new business, a new space

Zhengtong Electronics has a complete line of secure payment products and financial security payment solutions based on various access methods. The company's core product market share ranks first in the country and leads the world. According to shipment statistics, the company is the world's second largest encryption keyboard manufacturer, the world's third largest POS terminal supplier.

Traditional business: long-term ceiling is still far, short-term recovery growth brings high performance elasticity

The encryption keyboard is one of the company's core products. It should be able to guarantee a 10%-15% growth stability without considering new major customer breakthroughs. After nearly five years of accumulation, the company will break through the NCR probability of key customers this year and next. Larger, it is expected that there will be a process of heavy volume growth.

Benefiting from the new products such as card issuing machines and silver medical self-help, the pulling effect of the company's self-service terminal revenue is still in its infancy, and the company's self-service terminals are expected to maintain a higher growth rate of more than 30% this year and next. The future O2O and third-party convenience service platform requirements determine that the self-service terminal is still far from the growth ceiling.

The expected external factors such as destocking and upgrading of E-POS products have been basically digested in the first half of this year. There is still a high probability of achieving the recovery growth of E-pos machine sales throughout the year. With the follow-up promotion of upgraded products, The company's E-POS products are expected to usher in a new growth period.

New business: benefiting mobile payments, the company is expected to usher in another takeoff

Benefiting from the expansion of mobile Internet users, the penetration of smartphones, and the active cooperation between UnionPay and operators, China Mobile's payment resistance factors are rapidly eliminating. With the increase of subsequent NFC certification models will constitute the main catalyst for the development of mobile payment, it is expected that China Mobile's listed NFC mobile phones will grow to 20 at the end of September, and domestic mobile payment will usher in a very important development time in September.

According to iResearch data, the NFC near-field payment scale is expected to achieve 20 times explosive growth in the next three years. The M-POS machine is expected to become an important opportunity for the company to take off again. The current domestic POS machine penetration rate is only 7.4%, M - POS machines will significantly lower the application threshold of POS equipment, and the blue ocean market that will fill more than 90% of market entities in the future will be the biggest attraction of M-POS machines. Even ignoring the future growth of the company's traditional business, we estimate that only a new business of M-POS will be expected to bring the company's profit size nearly four times.

Reiterate "strongly recommended" rating with a target price of $17.5

Benefiting from the recovery of the traditional troika, and the expectation of new product M-POS aircraft to start increasing volume next year, the company will enter a new high-speed growth period. It is expected that EPS will be 0.35 and 0.54 yuan respectively in 13-14 years, and the compound growth rate will be three years. Up to 57.4%. The current valuation of the company is significantly lower than the industry average. As the mobile payment order is gradually transferred from the early chip card to the subsequent acceptance of the purchase, the company's valuation level will have a higher probability of moving to the industry average in the future. We strongly recommend investors to buy, Reiterate the "strongly recommended" rating with a target price of $17.5.