Incident: The company announced its 2019 annual report and 2020 quarterly report: in 2019, the company achieved operating income of 1,758 million yuan, an increase of 10.45%; realized net profit to mother of 134 million yuan, an increase of 27.93% over the previous year; realized net profit withheld from mother of 124 million yuan, an increase of 105.78% year on year. In the first quarter of 2020, the company achieved revenue of 216 million yuan, a year-on-year decrease of 31.75%; realized net profit of 3.29 million yuan to mother, compared to 5.09 million yuan in the same period last year. Key investment points: Fourth quarter results accelerated, and banking technology began a new cycle. The company's performance for the full year of 2019 was in line with expectations, and the net profit from the annual report was close to the forecast limit. Among them, the 2019Q4 company performed well, with a revenue growth rate of 21.47% in a single quarter, reflecting the acceleration of domestic banks' investment in technology. By industry, the company's banking and finance revenue was 1.2002 billion yuan, yoy +11.34%; non-bank finance revenue was 156 million yuan, yoy +5.52%; and internet marketing revenue was 323 million yuan, yoy +10.56%. The company's financial industry revenue was split by product; system integration revenue was 637 million yuan, yoy -2.34%; software business revenue was 656 million yuan, yoy +18.94%; IT operation and maintenance service revenue was 142 million yuan, yoy +48.11%. We believe that banking technology has entered a new development cycle in 2019, which is mainly reflected in two aspects: 1) the country implemented an autonomous and controllable strategy for fintech, and large banks needed to replace integrated equipment and basic software domestically; 2) cloud computing has become one of the bank's main infrastructures. Demand for private clouds and hybrid clouds for banks is expanding, and data centers continue to expand, which is reflected in a high increase in IT operation and maintenance revenue on the company's reporting side. At present, all banks have increased their investment in fintech. According to each bank's annual report, the four major banks invested more than 11 billion yuan in technology in 2019, of which the company's core customer CCB invested 17.6 billion yuan in fintech, accounting for 2.50% of CCB's revenue. Organizational structure optimization, cost reduction and profit flexibility. In 2019, the company adjusted its organizational structure, optimized the sales team, and controlled expenses, but the trend of increasing R&D investment continued. In terms of personnel structure, the total number of company personnel increased in 2019, sales staff was reduced by nearly half, and technical personnel were greatly expanded. Looking at the cost structure, the company's overall expense ratio in 2019 was 13.86%, a year-on-year decrease of 3.24pct. Among them, the sales expense ratio, management expense ratio, financial expense ratio, and R&D expense ratio were 3.72%, 4.51%, 1.52%, and 4.10%, respectively. The year-on-year changes were -2.29pct, -2.01pct, -0.5pct, and 1.55pct, respectively. In the case of stable and stable gross profit, the reduction in expenses brought greater profit flexibility to the company. In 2019, the company's R&D expenses were 72.13 million yuan, an increase of 29.14% over the previous year. The R&D investment direction covered the core products of various parent companies and subsidiaries, such as new credit business systems, core business systems, and billing platforms. The pandemic affected first-quarter results, and short-term fluctuations did not change the logic of growth. The 2020Q1 company's performance declined to a certain extent, mainly affected by the company's low operating rate under the pandemic and delays in the acceptance of technology projects by downstream bank customers. We believe that banks' technology investment plans for the next 2-3 years will not fluctuate greatly due to the epidemic. The increase in domestic banks' autonomous and controlled demand for technology and increased investment in fintech is a long-term trend, and banking technology has not changed in the upward cycle. Currently, the company has plenty of fintech orders. 2020Q1's inventory is 431 million yuan, up 144% from 2019Q1 and 214% from 2019Q4. The company's inventory mainly consists of system integration equipment and uninspected revenue. The sharp increase in inventory reflects the company's abundant unconfirmed orders. At the same time, the contract debt of 217 million yuan in 2020Q1 also reflects the company's abundant order status. Therefore, we believe that the company will be able to maintain a steady growth trend in 2020, and growth in the next 2-3 years is still worth looking forward to. Profit forecast and investment rating: Maintain a “buy” rating. Based on the principle of prudence, without considering the impact of fixed increases on the company's performance and share capital, we expect the company's 2020-2022 EPS to be 0.40/0.52/0.64 yuan, respectively, corresponding to the current stock price PE of 31/24/19 times, respectively, to maintain a “buy” rating. Risk warning: 1) the risk that banks' financial technology investment falls short of expectations; 2) the risk of uncertainty in implementing fixed increases by the company; 3) the risk that the company's performance falls short of expectations; 4) systemic risk.