HIGH DEMAND: China's ongoing and planned rail transportation construction, as part of the stimulus plan, represents great market potential for fare machines (COURTESY OF GRG BANKING)

It was a narrow victory. China's largest automated teller machine (ATM) maker, the Guangzhou-based GRG Banking Equipment Co. Ltd., beat overseas brands to become the largest supplier in the domestic market last year.

But the significance of this victory lies beyond numbers. Of the five leading suppliers that account for 80 percent of the Chinese market, GRG Banking is the only Chinese company.

Although the financial crisis has slowed down its revenue and net profit growth since the third quarter, GRG Banking last year reaped about 1.2 billion yuan ($175.7 million) in sales and 331.5 million yuan ($48.5 million) in net profit, up 52.67 percent and 43.17 percent, respectively, year on year, the company said in its 2008 annual financial report.

Yet 2008 marked the company's second year of shrinking gross profit margins. Overseas orders were slashed and the price war heated up, particularly since overseas ATM producers now all count on China for sales boosts.

"There are quite a number of obstacles for us to achieve the goal the board set for us this year," Ye Ziyu, General Manager of GRG Banking, said while announcing the first-quarter results. "It's crucial to our performance this year whether we can secure more orders in the first half."

GRG Banking is pinning its hopes on both China's financial services expansion in vast rural areas, for a breakthrough in ATM sales, and China's 600 billion yuan ($84.8 billion) investment in urban rail transportation over the next seven years, to sell more Automatic Fare Collection (AFC) systems.

Applying its sophisticated ATM technologies and experience to AFC equipment and Point of Sale (POS) terminal manufacturing will help the company cut costs. "It's easy to do that because they have similar functional modules," said He Qifeng, an analyst with Great Wall Securities Co. Ltd.

The company has sought additional growth points by offering ATM equipment-based services, such as cooperating with banks in ATM equipment operation and equipment maintenance services.

"No industrial enterprise can rely only on product manufacturing for sustainable growth," said Zhao Youyong, Board Chairman of GRG Banking. "We have to introduce services while pursuing key technological edges for efficient cost control."

The money machine

ATM manufacturing remains the company's major revenue source and contributed 86.6 percent of the total last year.

GRG Banking, which inherited the legacy of China's first ATM maker, was established by Guangzhou Radio Group in 1999 to make ATM equipment with independent intellectual property rights. The company went public on the Shenzhen Stock Exchange on August 13, 2007.

"Companies without control of core technologies will float like duckweeds and may not be able to ride out any economic turmoil," Ye said.

With this belief, the company developed its own banknote recognition module in five years, the essence of all financial computerizing technologies. The module, evaluated by the then Ministry of Information Industry in 2005, generally recognizes fake or new versions of renminbi notes much faster than overseas brands.

As of March 25 this year, GRG Banking had obtained 29 patents and copyrighted 23 pieces of software, and submitted another 41 patent applications to the State Intellectual Property Office of China.

It has more advantages as a domestic company. It can design functions to better reflect customers' needs and respond more quickly to market changes; its more than 180 service outlets staffed by 1,200 technicians enable service teams to arrive and get machines working again within three hours in urban areas.