Main points of investment

The lack of market awareness of the company's product ability. For IT, the production capability is very important, which reflects a company's comprehensive understanding and concentration of business processes, executive logic, etc. Once the product ability is formed, it can form a strong bargaining power to the downstream customers in some vertical areas. In the field of financial IT, due to industry attributes (business implementation rules and standards are formulated by regulators), the degree of product standardization is relatively strong, which is also conducive to the realization of the production of financial IT suppliers. We believe that Shisheng, as a company in the field of financial IT, has formed a strong product ability in the process of its development. And this may also be ignored by the market. The lack of awareness of the ability of winning products in the market is mainly reflected in: (1) the company has a single product structure and few categories, and the products are mainly concentrated in the background business and non-core business links in the financial IT. (2) the expandability of products and customers is not strong, and the development is limited.

Cognitive bias 1: production ability. Since the establishment of the company, the product line of the company has been expanding continuously; the process of product development can be divided into three stages: (1) from 2001 to 2014, the company develops its products around two product lines of "asset management" and "trusteeship"; (2) from 2014 to 2015, expand from two product lines to Internet finance; (3) product expansion has accelerated since 2016. At present, the company's products can be widely used in financial industry research, analysis, investment, trading, risk control, supervision, liquidation, accounting valuation, performance evaluation, depository, data integration and other business links.

Cognitive bias 2: customer extension ability. First of all, we need to pay attention to that the premise of customer malleability is the company's product ability. Since the establishment of the company, the type and scope of customers have been continuously expanded, and the process of customer expansion can be divided into two stages: (1) from 2001 to 2012, the type and scope of customers continue to expand; (2) since 2013, the number and penetration of customers have gradually increased. At present, the company has more than 350 customers in various financial industries, including banks, fund companies, securities companies, insurance companies, trust companies, financial management companies, national social security and so on.

Cognitive bias 3: product expansion ability. (1) Classification. At present, the company's products are mainly divided into four categories, including investment trading products, risk management and performance products, clearing, accounting and valuation products, and bank financial assets trusteeship products. (2) rich. After a long period of product expansion and extension, the company currently has a rich product range and functions, which can meet the needs of different customers in the industry at different levels. (3) the logic of business expansion. We believe that the expansion logic of the company's asset custody business is: based on the advantage of full coverage of business processes, gradually optimize product performance and expand user penetration; the expansion logic of the company's asset management business is to cut in from the back-end system, gradually expand to the front end, and gradually expand from the non-core system to the core system.

The extension of customers and products promotes the company's revenue growth. According to the annual report, official website and other public data, we have counted the number of customers and products each year since the company went public (replaced by the number of software product copyright). We find that the company's operating income is closely related to the number of customers and the number of products. Under the double stimulation of customer expansion and product expansion, the company's revenue grew rapidly from 2013 to 2017.

Profit forecast and investment advice. We believe that winning when winning has a strong product ability, which is the focus of our report, and it is also a place where the market has a large cognitive bias towards winning. The company not only has a strong product ability, product extension ability is also strong, promoting the rapid expansion of the company's customers. We estimate that the return net profit of the company from 2018 to 2020 is 180 million yuan / 296 million yuan / 416 million yuan respectively, and the EPS is 0.24 yuan / 0.40 yuan / 0.56 yuan respectively. At present, the corresponding PE of the stock price is 63 times, 38 times and 27 times respectively. Maintain a "buy" rating.

Risk tips: the risk of technology renewal and product development; the risk of brain drain; the risk that capital operation is lower than expected.