Shenzhen Zhengtong Electronic is the bellwether of financial electronic payment equipment industry, mainly producing encrypted keyboard, self-service terminal and telephone E-POS. The three major products occupy large proportion of the market; in particular, ATM encrypted keyboard covers over 90% of domestic market with edged competitiveness. Financial electronization is the basic driving force of industrial growth; its fast development will drive demand of financial electronic payment equipment rapidly boost.
IPO project will sharply expand the company’s capacity in 2009; with demanding financial electronization, additional capacity will be fully assimilated, thus income and net profit are expected to see explicit growth.
We project 2008-2010E EPS to be Rmb0.72, Rmb0.98 and Rmb1.19 with CAGR over 30%. Given current share price, 2008 and 2009 P/E ratio are forecasted at 17x and 13x respectively, and 2008 PEG at merely 0.6x, with comparatively low estimation; we maintain “Overweight” rating for the counter.