YIQIAO INFORMATION SERVICE(000606)：ENTERPRISE SERVICE ABILITY IMPROVING

Turnaround in 2016, in line with expectationYiqiao Information Service announced 2016 results: revenue was Rmb412mn, up 53.16% YoY; net profit attributable toshareholders was Rmb45.82mn, up 128.80% YoY, or Rmb0.06 per share. In the reporting period, the company recordedan investment gain of Rmb29.54mn, mainly on the sale of shares in other companies and subsidiary disposal.

Trends to watch

China's enterprise service market is vast; Yiqiao accelerating enterprise-internet business deployment;may build a large enterprise big-data platform. 1） As of end-2016, there were 87.054mn participants in theChinese market, with 16.513mn of them newly established ones in the year, up 11.6% YoY. There were 5.528mn newlyregistered enterprises in 2016, making for an average of 15,100 new registrants a day. The large number of new microenterprises provides room for large scale and diversified enterprise service. 2） Yiqiao provides “full-process-incubation”

and “one-stop” comprehensive service for small/medium and micro enterprises based on a chained and internet basedO2O model. So far, it has set up 528 operations centers, covering 31 provinces with more than 3.5mn users. Thecompany plans to establish 5,000 enterprise service centers in China in 3 years and accelerate deployment of itsstandardized and large-scale enterprise services. 3） Coordinating and sharing the functions of online cloud platform, thecompany will build an “online + offline” enterprise big data eco-system and a large enterprise big data platform.

Earnings forecast

We raise our 2016 and 2017earnings forecast 14% and 48% from Rmb0.05 and Rmb0.07 to Rmb0.06and Rmb0.1 per share. We introduce our 2018e EPS forecast of Rmb0.12.

Valuation and recommendation

The stock is trading at 119.6x/97.4x 2017/18e P/E. We maintain our BUY rating and Rmb17.00 target price,implying 42.5% upside room from the current price.

Risks

Traditional manufacturing business drags earnings; cross-region and cross-business exploration disappoints; significantincrease of offline staff leads to excessive cost pressure.

行情