Event
According to the interim report, the group achieved operating income of HK $8.673 billion in the first half of the year; business profit of HK $305 million (excluding net profit and loss on the sale of interests in a number of associates), up 601 per cent from the same period last year; net profit of HK $220 million, down 9.5 per cent from the same period last year; big data's business income reached HK $155 million, an increase of 185 per cent over the same period last year.
Brief comment
Business transformation is beginning to bear fruit, focusing on high-quality growth, with big data's business revenue up 185 per cent year-on-year. At the beginning of 2021, the company accelerates business transformation and strives to become a leading big data software company with independent innovation core technology. In the first half of the year, the group's big data business revenue reached 155 million Hong Kong dollars, an increase of 185% over the same period last year, of which the income related to big data, a corporate customer, increased by 312%, and the penetration rate of big data software among major customers was further improved. In the first half of the year, through the optimization of the business of enterprise and government customers, the group deepened its customers and improved its efficiency, with a comprehensive gross profit of 18.62%, a significant increase of 2.75% over the same period last year. The group's business profit in the first half of the year was 305 million Hong Kong dollars, after deducting the net profit and loss gained from the sale of the interests of a number of associated companies, the profit increased by 601% over the same period last year. The group's overall business has achieved high-quality growth.
Big data scene business of the industry has been continuously optimized, valuable strategic core customers have been ploughed deep, and the share of software revenue has continued to increase. In the big data scene of the industry, the company focused on and deeply cultivated valuable strategic core customers, optimized the business with low gross profit margin, and increased the overall gross profit margin of the business to 16.6% from 11.5% last year. During the reporting period, core customers accounted for more than 70% of revenue. Among them, major customers accounted for more than 85%. Since 2018, the retention rate of major customers has reached 92%, the compound growth rate of software-related income has reached 66%, the share of software revenue has continued to increase, and the average gross profit margin of its products has reached 25%, 30%, gradually increasing. At present, the group has also obtained byte jump, Meituan, BYD and other new customers.
The construction of smart city is accelerated, the group advocates the concept of "urban CTO", Yanyun DaaS products continue to improve and upgrade, standardized delivery and implementation bring dividend release. The 14th five-year Plan promotes the accelerated construction of smart cities. As a leading enterprise, the Group has a deep understanding of the government and cities. Yanyun DaaS, the flagship product of big data, which was developed earlier, has also been continuously improved and upgraded, and the degree of standardization has been further enhanced. The replicability between different cities has been greatly enhanced. The gross profit margin of new urban projects in 2021 has reached 70%, 90%, which is much higher than the comprehensive gross profit margin of the city big data scene business.
Financial technology business is growing steadily, and its extensive customer coverage has a strong synergistic effect with the group's big data software business. During the reporting period, income from information distribution in China reached HK $5.663 billion, up 18 per cent from a year earlier, and gross profit reached HK $983 million, up 25 per cent from a year earlier. Shenzhou Information has a bank IT full product line solution with a wide range of customers, which can provide more entry points for the Group to standardize big data's software business and produce better synergy with the Group. In addition, Shenzhou Information actively innovates business models, and the scene finance is growing rapidly. in addition to agriculture, taxation and other scenarios, in the digital RMB scenario, it has helped more than a dozen customers, including China Construction Bank Corporation, Guangfa Bank, Beijing Bank, Guangzhou Bank, Guizhou Bank, to complete the construction of digital RMB related application systems at different stages. The strategy of financial science and technology has been continuously advanced, and all kinds of business have been developed well.
Investment suggestion: in the future, the company will speed up business transformation, continuously improve and upgrade the core products of data processing technology around the data supply chain, and accelerate the development of the data industry to provide customers with a full range of data software product authorization, subscription and services. Maintaining the previous profit forecast, the company is expected to achieve operating income of HK $240.44 billion in 2021-2023, respectively. The annual profit is attributed to the shareholders' equity of the parent company of HK $7.51 billion, respectively, and the corresponding share price PE is 10.12, 8.04, 6.40 times, respectively, maintaining the "buy" rating. The company is expected to achieve an operating income of HK $29647 million, respectively, and its annual profit is attributed to the shareholders' equity of the parent company of HK $7.51 billion, respectively.
Risk hints: increased competition in the industry, changes in new infrastructure policies, rising labor costs, and lower-than-expected project landing.