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TransUnion passed the hearing of the Hong Kong Stock Exchange, ushering in a major progress on the road to IPO

On January 29, it is reported that TransUnion Technology Co., Ltd. (hereinafter referred to as “TransUnion”) has passed the hearing of the Hong Kong Stock Exchange, and Huanxin is its sole sponsor. This is the fourth time TransUnion has submitted a form to the Hong Kong Stock Exchange, and it has finally ushered in a major progress on the road to IPO.

It is understood that TransUnion is a service provider in the distribution market of telecommunications and data communication connection products in China. It was established in 1990 and has been operating for more than 30 years. During this period, the telecommunications network has developed from 2G to 4G. And the 5G transformation is unfolding. The company’s main businesses include telecommunications infrastructure, data centers, IoT and network connectivity products, and commercial lasers; major customers include Chinese communication module manufacturers, network system equipment suppliers, IoT and connectivity solutions and product suppliers, and other distributors.

According to the Frost & Sullivan Report, in terms of revenue, the Company ranked third as a service provider in the distribution market of telecommunications and data communication connectivity products in China in 2019, with a market share of approximately 4.4%.

According to the prospectus, for the years ended March 31, 2018, 2019 and 2020 and the four months ended July 31, 2020, TransUnion’s revenue was approximately HK$843 million, HK$871 million, and HK$971 million, respectively. HKD and HKD 759 million. Gross profits were HK$116 million, HK$137 million, HK$166 million and HK$92.772 million respectively; annual profits attributable to owners of the parent company were HK$34.946 million, HK$27.648 million, HK$33.448 million and HK$42.44 million respectively.

The next “spring” of the connection product industry is coming

2020 is called the first year of 5G in China. It is often said that in the 5G era, my country will achieve overtaking on curves in the field of network communications. So where is the confidence for us to overtake on curves? The answer is my country’s “devil-like” infrastructure capability, that is, the construction of a large number of base stations.

The development of each generation of communication technology can bring about an increase in the speed of information transmission. The increase in speed here is actually an increase in the amount of information transmitted in the same time period. The increase in the amount of transmitted information can be achieved due to the use of higher transmission frequencies. The higher frequency carrier bandwidth is larger, so it can carry more data. But the disadvantage of high frequency is that the wavelength becomes shorter, the propagation path of electromagnetic wave is straighter, and it is easier to attenuate. In order to solve this problem, the transmit power of base stations can be enhanced, but some existing base stations cannot meet the power requirements. Another way is to build a large number of micro base stations, which can be achieved.

As the basic unit of network communication, base stations are distributed in a cellular manner and undertake the function of sending and receiving information. According to Sullivan’s data, the number of base stations in my country increased from 3.4 million in 2014 to 8.41 million in 2019, with a compound annual growth rate of 19.9 %, and is expected to reach 11.72 million in 2024. Before 2020, the high growth rate of the number of base stations came from the large-scale construction of 4G base stations. After 2020, the construction of 5G base stations ushered in a peak. The Ministry of Industry and Information Technology proposed that more than 600,000 5G base stations will be built in 2021.

It is conceivable that in the near future we will be surrounded by all kinds of base stations, as ubiquitous as WIFI. After 4G, the broad market demand of 5G will bring the next “spring” to the telecommunications and data communication connection industry.

TransUnion’s value analysis:

With the continuous expansion of the business scale, the company’s operating income has increased. From fiscal year 2018 to fiscal year 2020, TransUnion’s operating income increased from HK$843 million to HK$971 million, with a compound annual growth rate of 7.3%. In the first four months of fiscal 2021, the company achieved revenue of HK$759 million, a year-on-year increase of 173.02%.

However, the company’s net profit attributable to the parent company fluctuated during the reporting period. From fiscal year 2018 to fiscal year 2020, the net profit attributable to ordinary shareholders of TransLink Lianxun was HK$35 million, HK$28 million, and HK$33 million, respectively. In the first four months of fiscal 2021, the company’s net profit attributable to the parent company was HK$42 million.

For the decline in net profit attributable to the parent in fiscal 2019, the company said that the main reason was the increase in administrative expenses and financing costs during the period.

From fiscal year 2018 to fiscal year 2020 and the first four months of fiscal year 2021, the company’s administrative expenses were HK$46 million, HK$59 million, HK$78 million, and HK$27 million, accounting for 5.46% and 6.77% of the operating income for the same period, respectively. , 8.03% and 3.56%.

In terms of financing cost, the financing cost in fiscal year 2019 was HK$15 million, a year-on-year increase of 52.2%.

It is worth noting that due to the drag of administrative expenses and financing costs, the company’s net profit margin is low. During the reporting period, the amounts were 4.1%, 3.2%, 3.4% and 5.6%, respectively.

Relying on large customers and high concentration of suppliers

In addition to the low net profit rate, TransUnion’s dependence on large customers and the high concentration of suppliers also need attention.

From the perspective of dependence on customers, during the reporting period, TransUnion’s sales to the top five customers accounted for approximately 49.1%, 40.3%, 47.9% and 64.4% of the total revenue, respectively. During the same period, sales to the largest customer accounted for approximately 17.1%, 10.6%, 17.5% and 41.5% of the total revenue, respectively.

From the perspective of purchases from suppliers, from FY2018 to FY2020 and the first four months of FY2021, TransUnion’s purchases from the top five suppliers accounted for approximately 87.7% and 88.2% of the total purchases for the current period, respectively. , 87.1% and 91.7%. During the same period, purchases from the largest supplier accounted for approximately 30.6%, 36.3%, 36.0% and 33.3% of the Company’s total purchases, respectively.

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