Incident: The company released its 2018 performance report, achieving revenue of 638 million yuan, an increase of 18.79% over the previous year; the net profit of Guimu was 180 million yuan, a year-on-year decrease of 13.55%. Operating costs were 129 million yuan, up 39.20% year on year; R&D expenses were 230 million yuan, up 19.66% year on year.
Key points of investment
The sharp decline in the performance of holdings and participating subsidiaries has led to a decline in the company's performance. We expect the company's endogenous performance to continue to grow positively: the company's performance declined in 2018, mainly due to a sharp decline in the 18-year performance of the company's holdings (Yingliang, Yingbao) and participating (Dongwu Online, Dongfang Jinxin) subsidiaries. 1. In terms of holding subsidiaries: Winning, which focuses on supply chain finance business, and Yingbao's two subsidiaries, which focus on factoring business, were affected by the country's macroeconomic environment and policies. The operating performance declined compared to the same period last year. The total net profit achieved in 2017 and Yingbao achieved net profit of 43.215,500 yuan. We expect this decline to be quite obvious. 2. In terms of participating subsidiaries, the company's investment income in 2018 was 2,3743 million yuan, a year-on-year decrease of 93.18%. The investment income in 2017 was 34.7985 million yuan (the investment income for joint ventures and joint ventures in the period was 279.22,500 yuan). We expect the investment income of participating subsidiaries to decrease by about 30 million in 2018. Excluding the influence of holdings and participating subsidiaries, we judge that the company's endogenous performance continued to grow positively in 2018.
The establishment of new financial management subsidiaries by banks will be a new expansion site for core products such as corporate valuation and liquidation: the new asset management regulations have been officially implemented, and they will be gradually implemented in the next 2 years. Large and medium-sized banks have basically announced the establishment of financial management subsidiaries to the outside world. Currently, ICBC's establishment of financial management subsidiaries has been approved. Among them, building business IT systems will become an additional requirement for financial management subsidiaries. The biggest change in the new asset management regulations for bank financial management business is the transformation of wealth management products to net worth products, which means that the ability to quickly and accurately provide product net worth and disclose it in a timely manner is critical. The valuation solutions of winning Shisheng's leading products - net worth products - are in an absolute leading position in the industry, which has been proven in the public fund industry over the past 20 years. For bank financial management subsidiaries, the company has now launched integrated solutions covering core modules such as financial sales and product management to help banks develop asset management services. Furthermore, the company's next-generation asset management system and asset custody system continues to be promoted to meet customer needs for next-generation asset management system upgrades, strengthen customer stickiness, and support the company's performance to continue to grow steadily.
Financial regulation is relaxed, and demand for new IT continues to be released: Currently, securities market regulation is showing a marginal relaxation trend, and a recovery in brokerage performance will drive an increase in IT spending. At the same time, changes in the financial IT industry under new regulations such as financial management subsidiaries and science and technology innovation boards have brought about a lot of incremental demand. At present, the establishment of a financial management subsidiary by the Industrial and Commercial Bank has been approved, the implementation opinions of the Science and Technology Innovation Board have been issued, and the company's upward flexibility has been highlighted.
Profit forecast and investment rating: The company's net profit for 2018-2020 is estimated to be 179, 256, and 360 million yuan respectively, and the corresponding PE is 58, 40, and 29 times respectively. The company's leading position in the middle and back office sector has been established, and the fintech landscape is already taking shape, maintaining the “buy” rating.
Risk warning: The gradual relaxation of financial supervision policies is lower than expected