The ATM market remains a monopolistically competitive market, excluding newcomers with high capital and technology thresholds. GRG Banking ranked as Asia's sixth and the world's eighth largest ATM maker in 2007, according to the London-based Retail Bank Research Ltd. (RBR).

Although the company predicted its overseas sales would exceed domestic sales within several years, domestic sales still account for the majority right now. GRG Banking currently sells products to more than 40 countries, is the market leader in Viet Nam, Laos and Cuba, and has expanded quickly in Africa and the Middle East.

ATM market prospects

Economic woes have cut tech orders since last September, giving rise to a price war between ATM makers.

Price competition has driven down its gross profit margin, from 53.55 percent in 2006 to 45.41 percent last year. The company posted a 6-percentage-point decrease in the first quarter.

Yet the Chinese ATM market has grown much faster than other markets in the Asia-Pacific region, recording double-digit growth for several years, while the region consumed one third of ATM equipment sold in the world last year, according to RBR.

China still has to increase the availability of machines in small cities and rural areas via shareholding banks and city banks. The country's ATM possession per million people has doubled from 73 in 2005 to 145 last year, only half the world average, according to a 2008 ATM market report by the China Banking Association.

Agricultural Bank of China, Postal Savings Bank of China and Rural Credit Cooperative, which all have many outlets in the rural-urban fringe areas, will show increasing demand for related financial services via ATM terminals, the report said.

New growth point

GRG Banking's other product, the AFC system, now sells tickets for the Beijing-Tianjin express rail, China's first intercity express railway, and two other express rails in north China and China's bustling eastern coastal region. These machines are also seen in more than 10 subway systems nationwide.

AFC sales generated 6.4 percent of GRG Banking's revenue last year, up from less than 1 percent in 2007-reflecting the 4.2 million yuan ($615,000) the company received from Beijing Subway Operation Co. Ltd.

Rail transportation construction, including subways, urban light rails and express rails, will reach its peak in five to 10 years. It represents market potential of 20 billion yuan ($3 billion) for AFC products, He Qifeng with Great Wall Securities said.

GRG Banking will see high growth in AFC sales in the coming years, in part because the government requires at least 70 percent of AFC equipment purchases to be domestic, he said.

GRG Banking is a little conservative in business diversity compared with the second largest domestic manufacturer, another Guangzhou-based public company, Kingteller Technology Co. Ltd. The latter reaped 39.3 percent of its revenue last year from cooperative ATM operation, like, sharing with banks the transaction fees charged on cross-bank cash withdrawals. Its ATM operation business grew 64.84 percent from the previous year, 14 percentage points higher than the company's ATM sales growth.

For GRG Banking, ATM cooperative operation contributed merely 2.56 percent of its revenue last year, and equipment maintenance 2.47 percent.

Conservative as it used to be, the company is giving serious thought to business diversity. It injected 15.3 million yuan ($2.24 million) to form a joint venture with three other domestic companies last October, focusing on outsourced banking services of banknote sorting, packing and delivery.

"They are new services in China," said Chen Zhenguang, Vice Manager of GRG Banking. "We look for new profit growth and hope that the market will reward us with a larger market share in the future."

Despite challenges everywhere, GRG Banking managed to report net profit growth of 14 percent in the first quarter, and predicted first-half net profit growth of up to 30 percent.