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26 May, 2017 (Friday)


SPC(002573.SZ)
Analysis¡G
According to the 2016 preliminary results, the company`s revenue and net profit continued to surge. Revenue soared by 49.48% yoy to RMB3.39 billion and net profit attributable to shareholders rose by 51.1% yoy to RMB766 million, far exceeding the consensus estimate. The sharp growth is mainly a result of the steady growth of construction and operating projects. In the meantime, expenses did not grow too fast and the period expense ratio even fell 0.65 percentage points to 10.0%, reflecting the company`s effective cost control. In the next few years, with concentrated releasing demand of ultra-low emission transformation in the thermal power field and desulfurization and denitrification in non-electric power field, the company will continue to enjoy the opportunities brought by the development of the industry, and acquire more contracts with the competitive edge in advanced technologies and integration, laying a foundation for the high-speed growth of performance in the next few years. With the competitive edge in the field of thermal power and the first-mover advantage in non-electric power fields, SPC can hopefully maintain an outperforming growth. Based on the estimate, from 2016 to 2017, the company`s net profit attributable to the parent company will reach RMB7.67/10.4, respectively, equivalent to an EPS of 0.71/0.97, respectively, and a PE of 28.7/21.2, respectively. We give a target price of RMB23.4 and the ¡§Accumulate¡¨ rating.
Strategy¡G
Buy-in Price: CNY18.45, Target Price: CNY23.40, Cut Loss Price: CNY16.00


Rentian Tech (885.HK) : Meeting Summary - IoT Player in HK Market

We met with Rentian Tech's management on 19 May 2017 to conduct research on the company. The following is the meeting summary.

Company Business

Through its subsidiaries and associated company, the company is principally engaged in (i) the provision of integrated smart Internet-of-things solutions to enterprise customers; (ii) Human-machine Interactive Devices business; (iii) securities investment; and (iv) money lending business.

The structure of IoT includes sensing, network and application. The company is the provider of IoT solutions covering ¡§Cloud¡¨, ¡§Pipeline¡¨ and ¡§Endpoint¡¨ businesses. The following table shows the meanings of ¡§Cloud¡¨, ¡§Pipeline¡¨ and ¡§Endpoint¡¨ and their main functions.

Business Transformation

The company was called Forefront Group before, and was a securities investment holding company. After a series of M&As, the company became an IoT player and changed its name to Rentian Tech on 14 July 2015. On 3 August 2015 the company announced that its new businesses are principally engaged in the provision of total IoT and industry 4.0 solutions for the comprehensive development, such as information flow, logistics flow and cash flow, of IoT.

The Company's FY2016 Results

In FY2016 the Group's revenue increased by 33.12% YoY to approximately HK$1,203.58 million. Integrated Smart IoT solutions business generated revenue of approximately HK$511.47 million with an increase of 731.93%. Revenue from Human-Machine Interactive Device business amounted to approximately HK$657.77 million, which represented a decrease of 12.21%. Revenue from the securities and other investment business decreased by 71.93% to approximately HK$25.64 million.

Integrated Smart IoT solutions business and Human-Machine Interactive Device business both belong to IoT business. And IoT business contributed about 97% of total revenue in FY2016.

Customers and R&D

The customers of Rentian Tech are from diversified industries. Their industries include bank, insurance, securities, telecommunication, government, cosmetics, retail, catering, apparel, E-commerce, logistics and so on.

The subsidiaries of the Group are ¡§High and New Technology Enterprises¡¨. And the Group has 101 patents, 104 copyright registrations and more than 100 full-time R&D employees.

Specific Businesses for Different Industries

For big data business, the company helps financial, insurance and other customers with data maintenance, management and analysis, and also provide data-based value-added services. For transmission business, the company provides efficient data transmission software and hardware solutions including optical fibers, cables and wired and wireless transmission. For pharmaceutical, catering and apparel industry logistics solutions business, the company provides intelligent logistics containers for the customers to achieve cost savings from the change from disposable packages to recyclable packages and monitor the logistics information to achieve the goods tracking, transportation route optimization and other value-added functions. For the intelligent robot logistics sorting and transmission business, the company helps customers with planning, designing, equipment procurement, installation and after sales service. For the express delivery industry, the company provides intelligent terminal scanning equipments and logistics background management system. The company also takes the future development of VR and AI into consideration.

Industry Prospect

According to the latest research report issued by Machina Research, a renowned international IoT research institute, in August 2016, it is expected that by 2025, the total number of connected IoT devices across the world will increase from 6 billion for 2015 to 27 billion, representing a compound annual growth rate (CAGR) of 16%, and China, the United States and Japan will top the list with rates of 21%, 20% and 7% respectively. Revenue from operations relating to IoT will grow from US$750 billion for 2015 to US$3,000 billion. Volume of data relating to IoT will also reach 2 billion TB.

Results Outlook

As at the end of December 2016 the market value of the portfolio the company held was about 2.88 billion, while the Group's market cap as of 24 May 2017 was about HK$4.06 billion. The market demands and industry prospect of the company's main business IoT business are good and the company's FY2017 and future earnings outlook is worth anticipating.

The company hopes to achieve sales synergy effects of ¡§Cloud¡¨, ¡§Pipeline¡¨ and ¡§Endpoint¡¨ businesses and make the main business revenue exceed the market average growth. The company's guidance for future revenue growth is 30% YoY. The company will explore the synergy effects in the future to make the main business profits exceed the revenue growth.

Risk

Security risk of IoT;

Integration risk after M&A.

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Writer Info
Ocean Pan
(Research Analyst)
Tel: +852 2277 6515
Email:
oceanpan@phillip.com.hk

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Phillip Research - Hong Kong ½÷¥ß¬ã¨s³¡ ¡V ­»´ä¤Î¤¤°ê
Company Stock Code Last Update Suggestion Target Price Price on Recom
Information Techology Research Department N/A+852 2277 6527research@phillip.com.hk
Goldpac Group331527/03/2017Buy32.4
O-Net Technologies87727/09/2016No Rating4.02
Transportation and Automobiles Zhang Jing (86) 2151699200-103zhangjing@phillip.com.cn
SAIC Motor60010425/05/2017Accumulate32.6729.23
China auto sector Quarterly report18/05/2017Market Perform
Insurance Research Department (86) 21 51699400-110research@phillip.com.cn
Media & Publishing Research Department (+ 86 21 51699400-107)research@phillip.com.cn
Wisdom Sports Group166111/07/2016Buy3.32.18
NetDragon77716/06/2016Buy28.422.9
Pharmaceutical Fan Guohe  (+ 86 21 51699400-110)fanguohe@phillip.com.cn
Tonghua Dongbao60086724/05/2017BUY27.0821.34
China Resources Sanjiu000999.CH17/05/2017Accumulate35.3829.71
Industrial Goods Ocean Pan +852 2277 6515oceanpan@phillip.com.hk
TK Group228320/03/2017Accumulate2.82.38
TK Group228310/01/2017Buy2.82.18
Health & Personal Care Fan Guohe  (+ 86 21 51699400-110)fanguohe@phillip.com.cn
Luye Pharma218622/03/2017Buy6.34.95
Harmonicare150917/01/2017Buy5.534.45
New Energy Wang Yannan 86 21 51699400-107wangyannan@phillip.com.cn
HN RENEWABLES95827/02/2017Buy3.52.72
CONCORD NE18224/10/2016Buy0.60.39
Food, Beverage and Retail Research Department (86) 21 51699400-110research@phillip.com.cn
L`OCCITANE97322/05/2017Accumulate1715.3
L`OCCITANE97319/05/2017Accumulate1715.3
Textiles & Clothing Ocean Pan +852 2277 6515oceanpan@phillip.com.hk
JNBY330613/04/2017Accumulate6.65.95
CECEP COSTIN New Materials Group222818/10/2013Buy5.64.23
Telecommunications Fan Guohe + (86) 21 51699400-110fanguohe@phillip.com.cn
Chinasoft International Ltd35410/04/2017Buy5.84.61
Chinasoft International35426/10/2016Buy4.863.72
Mainland Property John Wong +852 2277 6527johnycwong@phillip.com.hk
KWG Property181323/05/2017Accumulate6.555.6
Hongkong & Shanghai Hotels4510/05/2017Accumulate10.489.14
Basic Materials Ocean Pan +852 2277 6515oceanpan@phillip.com.hk
ND Paper268905/04/2017Accumulate9.58.35
ND Paper268909/03/2017Accumulate11.6510.02
Utilities Research Department +852 2277 6527research@phillip.com.hk
DONGJIANG ENV89515/05/2017Buy14.812.16
China Tianying000035.SZ09/05/2017Buy9.37.05
Properties John Wong +852 2277 6527johnycwong@phillip.com.hk
Great Eagle4116/05/2017Neutral39.338.5
K. Wah International17327/04/2017Accumulate5.85.06
Software & Service Research Department (86) 21 51699400-110research@phillip.com.cn
Rentian Tech88526/05/20170.000
IGG800221/11/2014Accumulate3.953.44
Hotels and Entertainment John Wong (+ 852 2277 6527)johnycwong@phillip.com.hk
Jinjiang Hotels200608/07/2016Accumulate2.982.49
CUTC60035808/03/2016N/A10.41

Information contained herein is based on sources that Phillip Securities (Hong Kong) Limited and/or its affiliates ( the ¡§Group¡¨) believe to be accurate. The Group does not bear responsibility for any loss occasioned by reliance placed upon the contents hereof. The Group (or its employees) may have interests in relevant investment products. For details of different products¡¦ risks, please view the Risk Disclosures Statement on http://www.phillip.com.hk.

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