Will acquire 25% stake in Aebell to enter video surveillance business
   
On Feb 21, GRG announced plans to acquire a 25% stake in Aebell, a New ThirdBoard-listed video surveillance technology vendor, for Rmb48m. Aebell reportedRmb156m of revenue and Rmb11m of earnings in 2015. GRG states that theinvestment will enhance its position in the security industry. GRG already has a largearmed escort business, and we believe adding video surveillance fits its long-termstrategy.
   
Wins equipment contract from ICBC for the first time
   
On Feb 18, GRG announced winning two cash sorter bids from ICBC. The officialcontract will be signed later. This is the first time GRG has won any equipment contractfrom ICBC; it has already built partnerships with almost all other large-scale commercialbanks in China. The value of the cash sorter contracts has not yet been disclosed, butwe view it as a positive sign that demonstrates GRG's market leadership.
   
Hardware and IT service businesses developing neck and neck
   
The two positive announcements underscore our point that GRG's two business lines,financial equipment (mainly ATMs) and IT service, both have good growth potential.
   
Although ATM market growth has decelerated, GRG continues to gain market share.
   
Meanwhile, it is actively expanding into software and IT service sector through strategicinvestment and acquisitions.
   
Valuation: maintain Buy, PT Rmb18.00
   
The stock trades at 16.5x/14.1x 2017E/2018E P/E, significant discounts compared tothe A-share IT peer group average. We believe the market has underestimated thecompany's growth perspective in the long run. Our price target of Rmb18.00 is derivedfrom DCF assuming WACC of 8.1% and implies 22.6x 2017E P/E. Maintain Buy.