Report guide
Non-deductible performance increased 32% in 2021, and 22Q1 performance declined significantly due to last year's high base and project cycle factors. The coverage of financial innovation has expanded, and the high goals of increasing executive holdings and equity incentives have shown confidence.
Key points of investment
Deducted non-net profit increased 32% in 2021, the 22Q1 Xinchuang tender was lackluster, and performance fluctuated in the short term.
In 2021, the company achieved revenue of 863 million yuan, an increase of 34.80% over the previous year, net profit of 248 million yuan, an increase of 1.53% over the previous year; after deducting net profit of non-return mother's net profit of 221 million yuan, an increase of 31.89% over the previous year. In Q1 2022, the company achieved revenue of 79 million yuan, a year-on-year decrease of 47.3%; the net profit of the mother was 47 million yuan, compared to 25 million yuan in the same period in 2021. We believe that the main reason for the short-term fluctuation in the company's Q1 performance was the high base effect of Q1 in 2021 and the fact that the Party, Government, Culture, Innovation, and Innovation were in the acceptance period, and the impact of the pandemic on project revenue was low.
Equity incentives account for a high proportion of middle-level personnel, and can be expected to stimulate their enthusiasm. The target performance growth rate in '22 is over 50%.
On April 27, 2022, the company announced an equity incentive plan. It plans to grant 16.875 million stock options, accounting for about 3.68% of the total share capital, and the exercise price is 14.53 yuan/share. The first incentive was granted to 262 people, and middle management, technical, and business personnel accounted for 77% of the total number granted. We believe that this time, equity incentives have a large coverage and a high proportion of middle-level cadres, which is expected to fully mobilize the enthusiasm of personnel. At the same time, the current equity incentive plan sets high performance assessment targets, and the 2022-2023 performance growth rate reached 51% and 33% year-on-year.
The chairman of the board and financial director increased their holdings by 30 to 50 million yuan, fully demonstrating their confidence in future development.
Huang Yongjun, chairman of the company, and Xu Shaopu, deputy general manager, financial director and director, plan to increase the company's holdings, totaling 30 to 50 million yuan. The management's massive increase in holdings fully demonstrates confidence in future development.
Financial innovation coverage has expanded, domestic production rates have increased, and servers account for a relatively high share of servers, which is expected to fully benefit.
The third batch of financial innovation pilots is expected to be launched. Banks have wider coverage and increased localization ratio. We believe that servers account for a relatively high share of financial innovation hardware purchases, and the company's middleware products are expected to fully benefit.
Profit forecasting and valuation
The company's revenue for 2022-2024 is expected to grow at 44%, 37%, and 30%, respectively; net profit attributable to the parent company is 3.78, 504, and 639 million yuan, with year-on-year growth rates of 52%, 34%, and 27%; EPS is 0.82, 1.05, and 1.32 yuan, corresponding to the current stock price of PE 21, 16 and 12 times the current stock price of PE. Currently, the stock price has been fully adjusted. I am optimistic about the performance and valuation flexibility brought by Xinchuang and Industry Safety Dual Wheel Drive, and maintain the “buy” rating.
Risk warning 1. Risk of Xinchuang falling short of expectations; 2. Risk of industry competition; 3. Risk of technological upgrading.