I. Overview of events

In the first half of 2019, the company achieved total operating income of 359 million yuan, an increase of 16.91% over the same period last year, a net profit of 80 million yuan, an increase of 6.12% over the same period last year, and a net profit of 76 million yuan, an increase of 8.56% over the same period last year.

II. Analysis and judgment

Driven by the superimposed policy of financial development, the company's main business income has increased steadily in recent years, the scale of asset management and trusteeship business in China's financial market has continued to expand. At the end of 2018, the trusteeship scale of China's banking assets was 145 trillion yuan, and the depositary Prida 79.86% of the total assets. At the end of the first quarter of 2019, the balance of China's asset management was nearly 80 trillion yuan, accounting for nearly 1/4 of the total financial assets. At the same time, with the implementation of the new regulations on asset management and other policies since 2018, the construction of financial IT infrastructure and systems is facing a huge demand for transformation and upgrading, and financial institutions have a strong demand for financial technology. The company has long focused on providing information system solutions for the asset management and asset trusteeship business of financial institutions, benefiting from the growth of financial technology demand, the company's main business continues to make progress.

In the first half of 2019, the revenue of the company's customized software development and sales business reached 241 million yuan, an increase of 15.76% over the same period last year, while the revenue of the software technology operation service business reached 92 million yuan, an increase of 28.36% over the same period last year.

Adhere to the orientation of market demand and vigorously promote technological innovation

The company deeply grasps the development trend of business development and technology application in the financial industry, increases investment in research and development, broadens the scope of the company's products and services, improves the quality of products and services, and strives to enhance user experience. In the first half of 2019, the company invested 138 million yuan in R & D, an increase of 31.06% over the same period last year, accounting for 38.56% of operating income. During the reporting period, in view of the adjustment of the settlement mode of ETF transactions in Shenzhen, the company launched transformation plans involving valuation system, PCF system, capital system, etc.; in view of the introduction of MOM products, the company carried out corresponding transformation and upgrading of asset management valuation products, escrow valuation products and related supporting operation services. In order to meet the reporting requirements of regulators such as the Securities Regulatory Commission, the company has successfully developed a report supervision and submission platform, through which a number of securities fund clients have successfully completed the first batch of reporting tasks.

III. Investment suggestions

Cover for the first time and give recommended rating. The company has long served the domestic financial asset management and asset custody market segments, and has rich practical application experience in the industry. we believe that with the rapid development of the financial industry, driven by superimposed regulatory policies, the company is expected to continue to benefit. It is estimated that the EPS of the company from 2019 to 2021 will be 0.30, 0.38 and 0.46 yuan respectively, and the corresponding share price PE will be 33X/27X/22X. Hang Seng Electronics, Changliang Technology, run and Software are selected as comparable companies in the field of financial IT. The industry average PE from 2019 to 2021 is 44X/32X/25X respectively. The company has a certain valuation advantage and is recommended and rated.

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Fourth, risk tips:

The risk of seasonal fluctuations in operation; the risk of bad debts in accounts receivable.