According to a report from CCTIME Finance APP, CICC released a research report stating its initial coverage of LianLian Digital (02598), giving it an 'outperform industry' rating. The company is expected to have an EPS of 0.03 yuan and 0.09 yuan for 2024 and 2025, respectively (adjusted), with a CAGR of 132% (2023-2025e) and a target price of 11.8 Hong Kong dollars. The company is a leading provider of cross-border and domestic digital payment solutions in China. The market believes that the cross-border payment industry is highly competitive, and the barriers to entry for the Chinese credit card clearing market are high. CICC believes that the company has a solid leading position in the cross-border market, and LianLian Digital is expected to rapidly expand into the high-end credit card market, boosting the company's valuation.

CICC's main points are as follows:

The digital payment and value-added service market have broad market space and strong growth momentum, with LianLian taking advantage as a leading institution.

According to Frost & Sullivan data, China's digital payment transaction volume (TPV) is expected to grow from 181 trillion yuan in 2022 to 354 trillion yuan in 2027, corresponding to a compound annual growth rate of 14%. The revenue from value-added services provided by digital payment service providers is expected to increase from 33.9 billion yuan in 2022 to 88.3 billion yuan in 2027, with a compound annual growth rate of 21%. Cross-border payment TPV and value-added service revenue are growing even faster, with an expected compound annual growth rate of 25% and 32% from 2022 to 2027. CICC believes that LianLian is expected to continue leading the industry's development based on its extensive global licenses and business layout, rich business experience and technological accumulation, as well as deep customer resources and industry partnerships, benefiting from the high-speed growth in the industry.

Deepening its presence in the digital payment field to build multiple competitive barriers, extending value-added services to create a second growth curve.

The company has been deeply involved in the digital payment field for many years, establishing three core competitive advantages in licenses, technology, and customer resources: 1) According to Frost & Sullivan, the company has the widest global business layout and license coverage among all digital payment solution providers in China; 2) The company has developed proprietary technology platforms to address the complexity of global trade and maintains high R&D investment and an expanded R&D team to continuously enhance its technological and product service advantages; 3) Leveraging high-quality product services and years of business cooperation, the company's active customer base continues to grow rapidly, maintaining high customer stickiness. At the same time, the company continues to extend value-added services, improve service ecosystems, deepen competitive barriers, and in the future, CICC believes it may build a second growth curve.

Holding shares in Linked Companies enables access to scarce license resources, and partnering with American Express to share development dividends.

LianLian Digitally Holds 45.2% of the shares of the first Sino-foreign joint venture bank card clearing institution in China. Considering the high threshold for bank card clearing business access, Linking is expected to enter the high-end credit card market in China and cross-border scenarios with the help of American Express. The bank believes that LianLian is expected to share the potential profit growth and valuation boost brought by Linked Company's rapid development.

Potential catalysts: Offline foreign trade digital transformation progress exceeds expectations; Linked Company's business growth exceeds expectations.

Risks: Intensified market competition, regulatory compliance risks, macroeconomic volatility risks, potential trade friction risks, risks of low stock trading volume, risks of restricted stock lifting.