Main points of investment:
The application of blockchain is accelerated, and the growth of Fintech business is expected. (1) on April 26, 2017, the company and Qian Fangjin signed a strategic cooperation framework agreement, and the two sides will cooperate in blockchain technology and mobile payment in the future. Qian Fanghaojin is a service provider of domestic mainstream mobile payment channels such as WeChat Pay, Alipay and JD.com Wallet, committed to promoting the interconnection of offline merchants and providing safe, reliable and convenient payment services. Sifang Jingchuang will make use of its advantages in blockchain technology to provide Qianfang with close access to the blockchain points system and realize its application; at the same time, the two sides plan to jointly invest in setting up a joint venture in Hong Kong, aiming to further promote and apply for the domestic advanced aggregate payment system in Hong Kong and Macao, and to apply to the Hong Kong Monetary Authority for a stored value payment licence (SVF) to expand payment business in Hong Kong. (2) on February 28, 2017, the company signed a blockchain cooperation contract with IBM. The two sides will form a team of blockchain experts to promote the application of blockchain technology in transnational and cross-border innovative financial technology. (3) on May 31, 2016, the company was one of the sponsors of the financial blockchain cooperation alliance, the topics involved include: 1) the technical platform at the bottom of the blockchain; 2) the cloud service platform of the blockchain; 3) the blockchain in the integration field; 4) the application of the blockchain in the primary and secondary market financial management.
The performance of 17Q1 is growing rapidly, and the home net profit is up 64% compared with the same period last year. The company's revenue in the first quarter of 2017 was 96 million yuan, an increase of 57.60% over the same period last year. The net profit returned to its mother was 12.54 million yuan, up 65.73% from the same period last year. The net profit after deducting non-return was 12.44 million yuan, an increase of 64.42% over the same period last year. The main drivers of performance growth are:
Growth in revenue from software development and maintenance. According to the company's annual report, the operating income in 2016 was 367 million yuan, up 22.21 percent over the same period last year; the net profit returned to the mother was 76 million yuan, up 49.36 percent over the same period last year; and the net profit after deducting non-return was 73 million yuan, an increase of 48.52 percent over the same period last year. For 16Q1, 16Q2, 16Q3, 16Q4 and 17Q1, the growth rates of operating income were-7.0%, 4.8%, 55.8%, 34.2% and 57.6%, respectively, and the growth rates of homed net profit were 19.6%,-28.5%, 192.5%, 120.8% and 65.7%, respectively. It can be seen that the growth rate of the company's 17Q1 revenue is the highest for the last five consecutive quarters. In addition, the growth rate of 17Q1 revenue and net profit match, indicating that the overall performance drivers of the company are good, and the high performance growth has a certain degree of continuity.
The share of software business revenue has further increased. (1) the revenue of software development business was 332 million yuan in 2016, an increase of 26.87% over the same period last year, accounting for 90.54%, an increase of 3.32% over the same period last year, and a gross profit margin of 51.65%, an increase of 5.80% over the same period last year. (2) the revenue of the technical maintenance business was 15 million yuan in 2016, an increase of 2.74% over the same period last year, accounting for 4.10% of the revenue, a decrease of 0.77% over the same period last year, and the gross profit margin was 75.91%, which was basically the same as the same period last year. (3) system integration business, revenue in 2016 was 20 million yuan, down 17.12% from the same period last year, revenue accounted for 5.36%, an increase of 2.55% over the same period last year, and gross profit margin was 7.67%, an increase of 1.19% over the same period last year. The company's software development business has grown steadily, and the proportion of revenue has gradually increased. From 2012 to 2016, the proportion of software development business income was 82.4%, 80.5%, 80.1%, 87.2%, 90.5%, respectively.
The award of equity incentive has been completed, and the incentive mechanism has been further improved. On May 9, 2017, the company announced that the restricted stock grant was completed in 2016. the number of restricted shares granted under the equity incentive plan was 1.0768 million shares, accounting for 1.03% of the total share capital of the listed company before the grant, with a grant price of 28.90 yuan per share. granted to 145 people, including the company's core technical and business personnel. The proportion of unsold in the next three years will be 30%, 30% and 40%, respectively. Based on the company's net profit in 2016, the growth rate of net profit in 2017 is not less than 15%, in 2018 is not less than 20%, and in 2019 is not less than 25%.
Profit forecast and investment advice. We believe that the high growth in performance shows that the company has leading business understanding and experience in the field of banking IT; the acceleration of blockchain application is expected to make the company a leading practitioner in the domestic blockchain field, and the growth and expansion of Fintech business is worth looking forward to. We estimate that the company's EPS for 2017-2019 will be 1.07 pound 1.47pm 1.97 yuan. Refer to comparable companies in the same industry, give 2017 dynamic PE 55 times, 6-month target price 58.90 yuan, maintain the "buy" rating.
Risk hint. The risk that the application progress of blockchain is lower than expected, the risk that bank IT demand is lower than expected, systemic risk.
