CSCI-Stock Connect-United Electronics (002642 CH)：Gearing up for new growth - 20171030
Gearing up for new growth
DC as the traditional stronghold. United Electronics Co., Ltd. (“UEC”) boasts an extensive DC customer base in fields such as energy, telecom, manufacturing, government and finance, and has gained a first-mover advantage in the emerging biology industry.
Moving into financial IT storage. UEC announced on Jul. 7, 2017 the buyout of storage system integration solution provider Shenzhen Zanrong Electronic Technology Co., Ltd. for RMB840mn in cash and shares. The acquisition offers a good complementation to UEC’s existing customer base, facilitates cross-selling in different industries and regions, and improves customer stickiness.
Entering the DNA sequencing space. By visualizing analysis results, UEC’s integrated DNA sequencing instrument makes the supposedly complicated DNA analysis and interpretation job easier for end-users. China currently has around 1,100 tier-1 hospitals and 6,700 tier-2 hospitals. Based on a DNA sequencing instrument penetration of 50% (10% for tier-1/tier-2 hospitals) and a unit sales price of RMB1mn, we estimate the market potential for UEC’s integrated DNA sequencing instrument could amount to about RMB1bn in China.
Tapping into IoV. UEC’s IoV division posted RMB143mn in net profit in 2016, up 30% YoY. China’s car insurance market is worth nearly RMB500bn with a 15% CAGR. If China frees up its car insurance premium rates, its UBI penetration is expected to reach 25% by 2020, translating into a market size of RMB300bn, boding well for UEC.
Profitability forecast. We project UEC to reach an operating revenue of RMB1.75bn/3.03bn/3.68bn for FY17-19, with RMB250mn/310mn/420mn in net profit attributable to the parent company and a 3-year CAGR of 20%, corresponding to EPS of RMB0.39/0.46/0.63. Recommend an Outperform rating with a target price of RMB21.0.
UEC Group Ltd Formerly known as United Electronics Co Ltd. UEC Group Ltd., formerly United Electronics Co., Ltd., is an industry Cloud Computing and data platform solutions and service providers. The Company operates through three main segments. The Enterprises Services segment is engaged in the provision of comprehensive solutions for enterprises through integrated planning consultation, system integration, professional operation and maintenance and special services. This segment is also engaged in the intelligent city, enterprise cloud computing and other fields. The Internet of Things segment is engaged in the provision of data acquisition and access products to support the construction and operation of Internet of Vehicles, Internet of Water and others. The Bio-medical segment is involved in the research and development of biological could platform.
中信建投国际研究部是中信建投证券香港子公司中信建投国际下属研究部门，负责香港上市公司、行业和宏观研究。我们的研究产品和服务包括行业报告、公司、宏观、常规日报、新闻摘要、分析员路演、上市公司非交易路演和反向路演 以及策略会。
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