Why has "ID card" become the hottest concept stock? Three types of players are on fire half the sky

Author | Li Shuiqing

Edit | Heart

Imagine that when taking the train, taking the plane, staying in the hotel, we no longer have to swipe the ID card; when we go to the community to do things, we don't have to run back and forth to prove that "I am me"; the "little confusion" that is easy to lose the ID card, no longer need to go to a few places to make up for it...

Digitization of identity cards – everyone will feel the great convenience of this national project, without waiting for three or five years, just this year.

"We want to implement a policy this year, which is to make people's commonly used ID cards electronic. In other words, you take your mobile phone and scan the code on the relevant matters. The prime minister said at a news conference on March 11.

With the order of the top level, a new story containing the wealth code immediately caused a sensation in the capital circle.

In the past week, the stock "hellish" decline in the background, the concept stock of electronic ID card has risen all the way against the trend and become a thriving. Today, with the strong rebound of Chinese stocks, the concept stock of electronic ID card still maintained its rise. As of today's close, the electronic ID card concept stock sector rose by 7.26%, of which Many stocks such as Zhongfutong, Yuanfang Information, Nanwei Software, Infineon, and Jinglun Electronics continued to rise and fall.

▲As of today's closing, the trend of electronic ID card concept stocks

Keen-sense investors have already struck, and they hear that the "starting gun" of this new story just started three weeks ago.

Just before the premier drew the key points, on February 22, the General Office of the State Council specially launched a "Opinions on Accelerating the Expansion of the Application Field of Electronic Certificates and Mutual Recognition of Electronic Certificates and National Mutual Recognition" (hereinafter referred to as the "Opinions"), setting a timetable - by the end of 2022, the electronic certificate sharing service system of the national integrated government service platform will be basically established.

It is no exaggeration to say that this will be a major milestone in the development of digital government in the mainland, and an important finale of the last year of the current government's ten-year term.

With the basic realization of electronic ID cards at the end of this year, many problems in digital government affairs will also be "one through the other". So what are the major implications of the digitization of identity cards? And what kind of new market and wealth code is hidden? Which players will be the likely beneficiaries? We explored this in depth.

First, the electronic ID card "starting gun" is fired to change everyone's life

Hearing about the electronic ID card, some people may be like me, feeling that this is something that has been around for several years, just like when I first heard the digital yuan, I think it is no different from WeChat and institutional treasure payment.

For example, the "electronic ID card" on Alipay can be shown and used in many scenarios such as nucleic acid testing and identity verification.

But this is not what we call an electronic ID card today, but a "resident identity electronic voucher", a network card containing ID card information, which can only call part of the functions of the ID card. For example, when we check in in hotels, take high-speed rail planes, and internet cafes to access the Internet, we all need to use the id card to register, and this kind of network card cannot replace the ID card.

The advent of electronic identity cards will change that. Because except for not having a physical card, its functions and legal effects will be exactly the same as that of a physical identity card.

According to the Opinions, along with the electronicization of identity cards, including birth medical certificates, household registration books, social security cards, academic degree certificates, driving licenses, and real estate property rights certificates, etc., will be electronic. "All information that can be obtained through electronic licenses is no longer required for enterprises and the public to provide corresponding materials."

That is to say, when going out to travel and stay in a hotel, there is no need to carry an ID card with us; when we go to the government affairs office, we do not need to run back and forth to prove the problem of "I am me"; migrant workers in foreign villages no longer need to travel thousands of miles to go home to get a household registration book when they register their marriages; when graduates find a job, they do not need to bring a large number of ID cards, academic degree certificates and other documents...

At the same time, corporate licenses will also be electronic. When the enterprise sponsor registers, invests, pays taxes, social security and other matters, it is no longer necessary to bring a large number of originals and copies to the office, and only needs to show the business license, production and operation license, etc.

Since 2017, the digitization of identity cards has been piloted in many places in the mainland. For example, in Henan Province, more than 10 million people have applied for electronic licenses in 2021, and residents can show electronic certificates by app, WeChat and Alipay Mini Programs, and they can show their electronic ID cards by showing the QR code on the license details page.

As of now, however, these pilots have tended to be limited to some regions and industry sectors. For example, a Henan person staying in a hotel in Henan Province can use an electronic ID card, but it is not possible to go out of the province; staying in a hotel, traffic police road inspection can use an electronic ID card, handling government service matters, airport security inspection and other scenes but still do not recognize.

In general, with the order of the high-level, the "starting gun" to achieve the national interconnection of electronic certificates and the full field coverage has been launched. This year is expected to be the first year of the national interconnection of electronic certificates, which will change everyone's life.

Second, the stock market collective diving, electronic ID card concept stock into a "thriving"

For the capital market, this is a "new story" that means a huge potential new market, hiding a new wealth code.

Under the background of the epidemic and international tensions affecting the operation of society, international turbulence such as resource competition, mutual sanctions, and financial crisis has also affected the normal operation of the domestic economy, and the recent stock market plunge has become a significant phenomenon. In the past week, A-shares and Hong Kong stocks have almost experienced hellish setbacks, with more than 100 shares in the two cities falling to a halt continuously; large companies such as Tencent and Ali have fallen by nearly 20% in two days, and the market value has evaporated by nearly 3 millets (more than 700 billion yuan); even the medical sector that has always been optimistic has crashed.

In this situation of collective diving, the concept stock of electronic ID card has become a "thriving".

On March 11, the day of high-level key demarcation, the electronic ID card concept stocks collectively strengthened, xiongdi technology "20cm" up and down, Shensi electronics, Hengbao shares and other up and down. This upward trend has continued so far, as of the close of March 15, Nanwei software up and down 3 consecutive boards, far information 20% up and down, Infineon, Jinglun Electronics up and down, Shensi Electronics, digital authentication, Xiongdi Technology and so on to follow the rise.

Why can the electronic ID card sector become a "small red flower" in the stock market?

According to a report released by Everbright Securities, digital identity offline applications can bring three market opportunities:

The first level, the identity document function, in government affairs, hotels and airports, etc., is used to replace identity cards, passports, residence permits; the second level, the comprehensive replacement of various statutory documents based on identity cards, including student cards, old age certificates, social security cards, etc.; the third level, generalized identity authentication and records, involving all access and authority-related occasions, such as exhibitions, homestays, public rental housing, etc.

In the first layer alone, there is a huge new market that is visible to the naked eye. According to the estimation of Everbright Securities, only in the fields of medical treatment, finance, hotels and homestays, the realization of first-level applications can bring more than 13 million devices of magnitude space.

This number is estimated like this:

There are 1.02 million medical and health institutions in the country, assuming an average of 3 equipment per medical institution, with a total demand of more than 3 million units; 220,000 bank outlets nationwide, 10,000 securities sales departments, and 6.4 million insurance sales personnel, with a total demand of about 8.5 million units; the number of hotels in the country is 280,000, and the total demand is more than 1.5 million units.

It is conceivable that when the second- and third-level generalized authentication applications are popularized, the space is at least an order of magnitude larger than that of the first-level application.

In fact, the construction of digital identity security infrastructure in the mainland has been underway since 2014. The Ministry of Public Security's "Research on the Second Generation of Resident Identity Card Network Application Program" was approved in 2014 to determine the technical scheme for the online application of resident identity card; in 2015, the pilot demonstration of resident identity card and online application "two provinces and two cities" was launched, and then gradually explored cooperation in various regions and fields.

At present, with the normalization of epidemic prevention and control, remote online handling has also become a normal demand, and electronic certificate interconnection has become a major need. With the realization of the interconnection of electronic certificates and licenses, digital government projects such as "inter-provincial communication office" and "one network communication office" will also be promoted as a whole, which will bring better environment and practical convenience to the economic operation and residents' lives under the epidemic.

Under the "non-contact" demand and policy thrust of the anti-epidemic, small electronic certificates have bred a vast and dynamic new market.

Third, deeply pickpocket the electronic ID card ecosystem, these three types of players ushered in opportunities

After talking about the market, let's look at technology and industry.

People who have been exposed to electronic certificates may understand that mobile phone two-dimensional codes and NFC (near-field communication) are the two main forms of electronic ID card offline. Take such a simple "brush" of the mobile phone, behind the need to go through at least 4 main links:

1. Each province, municipality and autonomous region shall formulate and issue electronic certificates and provide verification, and residents shall receive and use them;

2. When residents should apply electronic certificates in various industries and fields such as government affairs, hotels, and transportation, each department is responsible for providing verification services;

3. When residents need to brush electronic ID cards in specific government affairs halls, hotels, stations and other scenarios, they need to be equipped with relevant equipment at the scene point;

4. When residents need to use electronic certificates across regions, they need the national government service platform to provide electronic certificate verification data circulation services.

It can be seen that in all aspects, the incremental market involved includes hardware, software, data security and other sectors.

The electronic ID card concept stocks we mentioned earlier, such as Xiongdi Technology, Yuanfang Information, and Nanwei Software, are also mostly distributed in these technology industry chains. There are also players such as Newland, Chinasoft International, and SenseTime, which are not listed for the time being, but they are also potential stocks in this field.

1. Grasp the security hardware entrance, Xiongdi Technology, New World and other layouts

From the hardware point of view, if the electronic ID card is to enter the government affairs hall, traffic bayonet, hotel, tourist attractions in various scenes, it must have intelligent hardware entrances that meet the security level.

In the electronic ID card concept stock, Xiongdi Technology is an identity recognition hardware supplier. The company has risen 37 percent in the past five days (March 9 to March 15) and is up 10.58 percent as of yesterday's close.

On March 8, Xiongdi Technology said on the investor interactive platform that the company's second-generation certificate reader, multi-function document reader, two-dimensional code identity verification terminal and other products support ID card reading, writing, verification and other functions. Such smart hardware manufacturers have the proximity of long-term cooperation with government customers, thus occupying the best entry point in the field of electronic ID cards.

In addition to Xiongdi Technology, the electronic ID card concept stock Hengbao shares also rose by more than 12% in five days. Founded in 1996, Hengbao Co., Ltd. is a provider of magnetic stripe cards, password cards and operating systems, and has also mastered the best entrance to electronic ID cards.

Just like the digital yuan, electronic ID cards should be prevented from being tampered with and stolen, and the security level is very high. Terminal equipment with security chips and modules as the core is expected to replace existing equipment and drive the development of the upstream industry chain.

For example: chip and module supplier Newland, two-dimensional code module supplier Minde Electronics, Tianbo Information, signature verification server supplier digital authentication, Jida Zhengyuan, etc. may face favorable.

2, all over the place or to welcome the digital identity software for a new trend, far-away information, Nanwei software, etc. into a fragrant feast

Only hardware cannot support the whole process of electronic ID cards, and behind the hardware terminal is a national integrated government service platform from the local to the central government.

In terms of software, the digital identity system previously built in various places needs to be updated or reconstructed, so as to make the identity more accurate, and adapt to more application scenarios, so as to achieve cross-provincial and cross-application mutual recognition.

In the concept stock of electronic ID card, Hangzhou Yuanfang Information Company is undoubtedly the "most beautiful boy". As of the close of trading on March 15, Far-Flung Information was up 20 percent, up nearly 60 percent for five consecutive days.

Similar to Xiongdi Technology, Hangzhou Yuanfang Information is also an old government IT founded in 1993. Its 2021 financial report shows that the main business intelligent detection biometric information system and service revenue reached 190 million yuan, accounting for nearly 95% of its total revenue, of which a large part comes from the field of electronic ID card revenue, the company's gross profit margin reached 57.65%. Now, with the electronic ID card being increased by the national policy, the distant information will usher in new business growth.

Some software companies have few electronic ID cards, but they are still included in the concept stock category by the platform.

For example, Nanwei Software, which has risen by 31% in five days and rose by more than 10% today, is the "fragrant food" in the concept stock of electronic id card. However, Nanwei Software issued a change announcement on March 14 to negate its strong association with the electronic ID card market:

"The company is concerned about the media report that the company is involved in the electronic license business", but "the company's electronic license project in 2020 accounts for a relatively small proportion of the annual revenue". In fact, 70% of the company's revenue comes from government software products and solutions, and the spokesperson did not deny the future prospects.

Some software companies with artificial intelligence capabilities or resources have also become sought-after stocks in the concept of electronic ID cards. For example, Shensi Electronics, founded in 2004, has a cumulative increase of 16.7% in five days.

According to the financial report, the company mainly focuses on identity authentication products, accounting for more than 40% of its revenue in the 2021 semi-annual report. It has carried out technical cooperation with sensetime, a well-known AI company, in the direction of face recognition, and it can be said that it has advantages in the development of new technologies for electronic ID cards, and such characteristics may become a major reason for its optimism in the incremental market of electronic ID cards.

Since the concept stock of electronic ID cards has just been summarized, there are still some key players in this field that have not been grouped together. For example, information system companies such as Chinasoft International and Wanda Information, and integrators such as iSoftStone and Digital China are expected to become the main players in this field.

3, data security will be more important, traditional security vendors to increase the blockchain

When it comes to the new generation of electronic ID cards, it has to be said that data security is extremely important for electronic ID cards.

Imagine if the electronic identity card promoted is cracked by criminals, thereby copying and stealing other people's identity cards and committing illegal and criminal acts, then the consequences will be unimaginable.

With the promotion of electronic ID card throughout the country, the demand for scene data security and operation services such as public security big data and government big data will grow stronger.

In this batch of electronic ID concept stocks, digital authentication, which rose nearly 10% in five days, is a certification and security service provider, and its electronic authentication and network security services account for more than 60% of its total revenue in the first half of 2021. In addition, the aerospace information of the same electronic identity card concept unit is mainly engaged in anti-counterfeiting and tax control business, and Kelan Software is an electronic channel provider, which has some accumulation in the field of security.

As electronic licenses rise to a national project, the unified deployment of top-level design has become a trend, and some emerging technologies such as privacy computing and blockchain will also be introduced. New security vendors such as Ant Financial and JD.com may also benefit.

4. Or using the CTID platform, the enterprises in the Zhongdun Anxin ecosystem deserve attention

As mentioned earlier, the Ministry of Public Security of the mainland has explored the landing of digital identity verification technology since 2014. In the past decade of exploration, a set of platforms called "Internet + Trusted Identity Authentication Platform (CTID)" has become the main platform for online identity verification in China. This system has become the main authentication system supporting applications such as health code "one code pass".

▲Digital identity authentication based on network certificate

Some insiders said that the state may re-design the top level to create a new architecture, but it is also likely to follow this core system.

▲The main architecture of the CTID platform

In China, there is only one operator with a legally operated digital identity - Zhongdun Anxin. Founded in 2017, Zhongdun Xin'an is a subsidiary of the First Research Institute of the Ministry of Public Security, and CTID was handed over to Zhongdun Xinxin for full-time operation in 2018.

Because of this, the upstream and downstream ecological chain players around Zhongdun Anxin are expected to become new beneficiaries.

In February 2022, the rating results of The 2021 Commercial Application Cooperation Agency of Zhongdun Anxin were announced. Through the comprehensive assessment of 200 partners who meet the rating standards, Zhongdun Anxin finally evaluated 21 first-level application cooperation institutions and 19 second-level application cooperation institutions. Including digital authentication, Newland, Baidu, Byte, JD.com, Alipay, etc. are covered.

IV. Conclusion: A milestone in the development of digital government affairs for electronic identity cards

With the order of the top management, the electronic ID card has become a "thriving" in the current stock market, and many concept stocks have risen and fallen. We see that players in all aspects of electronic identity authentication, including hardware devices, software platforms, and data technologies, have new market opportunities.

In fact, electronic ID cards are not something new. On the one hand, many people have been exposed to the application of electronic identity credentials in specific scenarios, on the other hand, electronic identity cards, as an application, are a typical representative of the quantitative change to qualitative change in the development of digital government affairs in the mainland in the past decade, similar to applications such as "one code pass", which are based on a more powerful national integrated government service platform.

However, unlike other previous applications, the implementation of electronic ID cards will become a more important milestone in digital government. When residents have the same electronic ID, many cross-district offices and one-netcom applications will be all-accessible. The electronic ID card will be together with the digital yuan, allowing us to truly achieve a "twin" in the digital world.