State's view

State's Overseas Group View:

The main function of the Internet is to circulate the information on the Internet, and the information is spread in the way of copying (A copy to B). The "ledger" constructed by the blockchain is characterized by openness and transparency, non-tampering, peer-to-peer interconnection, and easy traceability, and builds an infrastructure based on the trust mechanism, so that the value of digital assets can circulate efficiently on the Internet, and the transfer of the value of digital assets occurs on the Internet (from A to B, rather than from A to B). We are optimistic about the future of the blockchain, but at this stage, the most important result of the blockchain is the concept of evangelism, which allows the market to see the inadequacy of the "Internet of information" and the trend of the "Internet of value".

Commentary

The relationship between blockchain and Bitcoin

There is no way to explain blockchain without Bitcoin. The "invention" of Bitcoin and the confirmation of the viability of blockchain as a technology, Bitcoin is not the whole of blockchain technology, just one of the applications. Without Bitcoin, it is possible that blockchain would not have emerged, or at least not soon.

The origin of the term "blockchain" is "chain of blocks" in the original English version of the Bitcoin whitepaper, and in the domestic Chinese translation, the term "blockchain" is used. The term "blockchain" was used in the Chinese translation of the original Bitcoin white paper. With the transfer of the center of gravity of bitcoin mining to China, the Chinese market has become the main battleground for blockchain and bitcoin, and the blockchain is written as "blockchain" in the English domestic market, which has become a global moniker for the entire blockchain technology level (the evolution path of the noun: chain of blocks). The term "blockchain" has become a global term for the entire blockchain technology (chain of blocks -- blockchain -- blockchain).

Bitcoin's limited total volume stimulates market speculation

Whether you think of Bitcoin as a commodity or a currency, its limited total volume stimulates the market to speculate on the price of Bitcoin, or cryptocurrency speculation for short. According to the bitcoin generation mechanism, the total number of bitcoins is 21 million.

Bitcoin is the reward after the new connection of a block, every 10 minutes to generate a block, each generated a block reward a certain number of bitcoins, in the first four years to reward 50, every four years the number of rewards for bitcoins halved, so the total number of bitcoins is 21 million. Calculation: {50 X 6 X 24 X 365} X 4 X {1+1/2+。。。。。 (1/2)n} = 21 million (2.1*107).

Technical Principles of Blockchain

The blockchain timestamps all transactions with a random hash, merges them into an ever-extending random hash-based, proof-of-work chain as a record of the transaction, and forms a record of the transaction that is immutable unless the full proof-of-work is redone. Forming a new block is a three-step process:

1. The miner packages the "ledger, header of the previous block, timestamp, and random array X" from a period of time into a block;

2. The miner adjusts the block's random array X through extensive computation to generate the hash that compounds the requirements and receives the bitcoin reward.

3. The miner joins the new block to the previous block to form a new blockchain.

The number of patents is an important indicator to quantify blockchain companies at this stage

The global blockchain industry is still in the early stages of development, and most companies are in the conceptual design stage, with no on-the-ground products, so it is difficult for outsiders to objectively evaluate the strengths and weaknesses of startups. We believe that the number of blockchain invention patents can reflect the potential of each company, and is an important indicator to differentiate blockchain companies through quantitative means at this stage.

Investment Advice: Based on the fundamentals of the company, focus on the value of the Internet in the era of the blockchain

The Internet has evolved so far, and its main role is to circulate information on the Internet, and the information spreads in a replicated way (A replicated to B). The "ledger" constructed by the blockchain is characterized by openness and transparency, non-tampering, peer-to-peer interconnection, and easy traceability, and builds an infrastructure based on the trust mechanism, so that the value of digital assets can circulate efficiently on the Internet, and the transfer of value of digital assets occurs on the Internet (from A to B, rather than from A to B). We are optimistic about the future of the blockchain, but at this stage, the most important result of the blockchain is the concept of evangelism, which allows the market to see the inadequacy of the "information Internet" and the trend of the "Internet of value".

The realization of the "Internet of value" requires large-scale applications, not a single technology. At this stage, blockchain is still in the early stages of development, we are optimistic about the future of blockchain, but we do not overestimate the present of blockchain.

In the Hong Kong stock market, there are many companies involved in blockchain, we recommend Tencent Holdings and Yuanzheng Technology from the company's fundamentals, considering the number of blockchain patents, and maintain the performance forecast and recommendation rating.

Tencent (0700.HK): We expect the company's 2019-2020 revenue growth rate of 22%, 22%, net profit growth to 23%, 16%, of which NON-GAAP profit growth rate of 15%, 16%. Corresponding to the 2019, 2020 EPS of Hong Kong dollars 10.4 yuan, 12.1 yuan, the target valuation range to maintain 380 to 400 yuan, corresponding to the 2020 31 times -33 times PE, maintain the rating of increase.

Yuanzheng Technology (2488.HK): We forecast that the company's revenue growth rate in 2019-2020 will be 9.7%, 12.2%, and net profit growth rate will be 69%, 29%, corresponding to the EPS of 0.32, 0.42 HK dollars. We maintain a "buy rating", suggesting a reasonable valuation of 8-9 Hong Kong dollars, corresponding to 25-28 times PE in 2019.

Risks

1, blockchain concepts can not be transformed into products. 2, the emergence of new technologies leading to the falsification of blockchain. 3, the profits of the company's existing business, can not be turned into products. 4, the company's existing business, the company's profits, the company's existing business, can not be turned into products. The company's existing business profits can not support the blockchain long-lasting R & D investment.

Appendix: Companies related to blockchain in Hong Kong stocks

1. Tencent (0700.HK): There is a dedicated blockchain portal (https://trustsql.qq), and on October 19, 2019, Tencent released the 2019 Tencent Blockchain White Paper", which introduces Tencent's blockchain solutions as a whole, including the TrustSQL blockchain underlying platform and Tencent Cloud TBaaS, and demonstrates four of Tencent's blockchain best practices in detail, including blockchain e-invoices, micro-enterprise chain, to the letter of the chain and blockchain bank drafts. Tencent, which specializes in "connectivity", continues to develop its infrastructure in the blockchain field, and promotes "blockchain+" industry solutions in order to promote value connectivity between enterprises and between enterprises and consumers. Through the "blockchain+" model, it empowers financial and real industries, promotes the integration of blockchain and industry, and accelerates the construction of industrial blockchain.

2. China Mobile (0941.HK): On October 15, 2019, the Blockchain Service Network (BSN) Conference and Technology Development Summit Forum, which was hosted by the Information Center, organized by China Mobile Communications Corporation and China UnionPay Corporation, and co-sponsored by Beijing Red Date Technology Company Limited, was successfully held in Beijing. China Mobile uses existing resources, cloud facilities and computing and storage facility resources to conduct independent research and development to achieve the optimization of existing facilities; China Mobile serves as a new cornerstone to promote the mutual empowerment between 5G and blockchain.

3. Ping An of China (2318.HK): 84 open global blockchain invention patent applications in 2018, ranking 7th in the world. Ping An of China relies on blockchain technology to improve the level of urban management intelligence, and Ping An applies blockchain to healthcare, precision poverty alleviation, and social welfare.

5. Zhong'an Online (6060.HK): A professional eco-cloud service platform based on artificial intelligence, blockchain and cryptography, Anchain Cloud, which uses Zhong'an's self-developed Zhong'an Chain as the underlying infrastructure and also develops nearly 10 vertical applications such as e-signing, digital identity, distributed encrypted storage, depository, traceability, and so on.

6. Kingsoft (3888.HK): the earliest to start implementing Game + Blockchain applications and solutions, the game cloud business is currently exploring the application of blockchain technology to accelerate the expansion of the game ecosystem. in the first half of 2018, Kingsoft Cloud took the lead in launching the blockchain game ecosystem "project-X" program, which realizes the development of the blockchain by the blockchain.

7. HC Group (2280.HK): on January 31, 2018, HC Group announced to the public that its first application scenario based on blockchain has officially landed, and the cooperation framework agreement signed with Javo will start from the field of agriculture to build HC Group's blockchain products, and with the advantages of industrial big data and blockchain application scenarios, it will expand the blockchain market of modern agriculture.

8. Yuanzheng Technology (2488.HK): The company is China's earliest commitment to automotive diagnostics, testing, maintenance, tire equipment R & D and production of high-tech leading enterprises. As a leading enterprise in the car networking industry, the company is y committed to exploring solutions for the integration and realization of automotive big data.In 2018, the company ranked fifth in the world in the number of blockchain-related patent applications, and stood at the forefront of new blockchain technology.The company has combined blockchain technology with industry applications to develop the "Super Car Chain Project" series, which is tailored for the car networking industry. The company has developed a series of "Super Vehicle Chain Project" products, and tailored a 4G vehicle data collection terminal with blockchain technology for the vehicle networking industry - GTBOX-I. Yuanzheng Technology has repeatedly stated publicly that it refuses to get involved in digital currencies and ICOs regardless of whether they are declining or flourishing, and it is not a public offering nor a private offering, and it is dedicated to digging out the value of the chain circle.

9. Meitu Corporation (1357.HK): Meitu Blockchain's vision is to create a trusted blockchain environment by creating a decentralized, secure and encrypted identity pass: Meitu Intelligent Passport (MIP - Meitu Intelligent Passport), which connects the digital world and the real world for users. On the one hand, Meitu Intelligent Passport (MIP) allows users to anchor their assets in various applications scattered on the blockchain, and through face recognition AI authentication, it is more convenient and safe to use various applications and get privacy protection; on the other hand, Meitu Intelligent Passport (MIP) also allows some services that require strong authentication, such as healthcare and education, to utilize the blockchain to serve the users more effectively.

10. Gome Retail (0493.HK): on April 14, 2018, according to Gome Retail, Gome has entered the era of comprehensive digitization, operating digital stores is Gome's "No. 1 project", and the company has been doing research on blockchain technology and decentralization technology. Gome retail related person in charge said: Gome **** enjoy the retail business model, as well as the staff of the United States store retail strategy is very consistent with the blockchain decentralized model system, the staff of the United States store is also Gome hope to build a new channel.

(Source: Guoxin Securities)

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