Event Overview The company released its 2019 annual report and 2020 Q1 quarterly report. In 2019, it achieved revenue of 1,758 million yuan, an increase of 10.45% over the previous year; realized net profit of 134 million yuan, an increase of 27.93% over the previous year, and the performance was in line with expectations. Looking at 2020Q1, due to the impact of the COVID-19 pandemic, the company achieved revenue of 216 million yuan, a year-on-year decrease of 31.75%; net profit of net income of 3.2895 million yuan, a year-on-year decrease of 164.64%. Analysis and judgment: The performance in 2019 was steady and positive. The bank's IT/mobile Internet dual-wheel drive drove the company's revenue to increase 10.45% year on year in 2019, and net profit increased 27.93% year on year. The main reason for the steady increase in performance was the expansion of the bank's IT business scale and the rapid growth of the mobile Internet business. In terms of traditional financial (banking) IT business, the software business (former IT solution business and software outsourcing business) achieved revenue of 656 million yuan, an increase of 18.94% over the previous year, while the supporting IT operation and maintenance business achieved revenue of 142 million yuan, a sharp increase of 48.11% over the previous year. Performance continued to improve. The reasons for the judgment mainly come from two aspects: 1) Bank IT investment boom is on the rise, compounded by the general trend of domestic production substitution, and market growth continues to be released. The company is in the first tier of the industry, directly benefiting from industry expansion dividends; 2) Under the domestic substitution trend, medium to large Demand for bank technology development has surged, and the business needs of the company's main core customers (such as China Construction Bank) and related banking technology subsidiaries (such as Jianxin Financial Technology) are continuously transmitted to the company, effectively boosting performance. On the other hand, the mobile Internet business (innovative business) also performed well, achieving total revenue of 323 million yuan, a significant increase over the same period last year, and has blossomed more in the fields of e-commerce, online reading, and gaming. It is worth noting that its three musketeers, Nut Technology, Xunteng Technology, and Fast Reading Technology, all performed well on the traffic side, and are optimistic that the enhanced traffic aggregation effect will lead to high revenue growth. The cost side slightly exceeded expectations. As research and development continues to deepen technological advantages and there is steady growth on the revenue side, the performance on the cost side exceeded expectations and further boosted the profit side. In 2019, the company's sales expenses and management expenses were 65 million yuan and 79 million yuan respectively. The corresponding year-on-year declines were -31.57% and -10.45% respectively, mainly due to structural adjustments, sales team optimization, and cost control. At the same time, financial expenses were 27 million yuan, down 16.80% year on year, mainly due to financing restructuring and enhanced cash management. Corresponding to the rapid decline in the three fees, the company's R&D investment continued to rise. In 2019, R&D expenses were 72 million yuan, a sharp increase of 29.14% over the previous year. R&D results include new credit business system development (already applied to the Postbank, etc.), core business system optimization (where the data migration platform has been applied to CDB, etc.), and Ruimin Pass (already applied to Pudong Development Bank, etc.). It is expected that the new products will continue to deliver results in subsequent years. In addition, the announcement revealed that the company will carry out private stock issuance, with a total capital raised of no more than 45,0025,700 yuan, mainly for developing intelligent financial solutions based on distributed architecture and further deepening the technical and product advantages of financial IT. Digital currency benefits are expected to participate in bank-side system transformation. 2020 is not only the starting point of a new round of bank IT investment boom cycle, but also the foundation year for central bank digital currency (DCEP). Bank IT system transformation requirements brought about by DCEP will bring transformative opportunities to the industry. In “Digital Currency Overview: Space and Framework Based on Banknote Substitution”, we believe that DCEP will mainly bring huge IT transformation and operation requirements in three fields: central bank side, bank side, and public side. However, the bank-side system is the focus of the transformation of the digital currency ecosystem. It is expected to be a conditional tender. For qualified bank IT service providers, the open market is huge. It is estimated that the corresponding space for bank-side IT systems is expected to reach 93.6 billion yuan/year, and leading bank IT manufacturers are expected to stand out. Although the company had previously clarified rumors related to digital currencies, it was revealed that it did not directly participate in the central bank's digital currency research and development work. However, we believe that the company, as a first-tier competitor in the industry, and also has a large number of medium and large high-quality bank customers, is still expected to participate deeply in the bank-side business brought about by digital currency in the future (such as core system interface transformation, etc.) and share the dividends of technological change in the industry. The 2020Q1 pandemic has dragged down performance growth. Steady growth throughout the year can still be expected. Judging from 2020Q1, the company's revenue fell by more than 30% and net profit fell to the bottom. Performance was greatly hampered by the pandemic. Specifically, in March 2020, the operating rate of the software and operation and maintenance business in the company's bank IT business was lower than in previous years, and the acceptance process for technology projects within bank customers was delayed, leading to delays in the recognition of some software revenue. At the same time, the mobile marketing business has been affected by the epidemic, the return of employees to work has been delayed, the resumption of production by a large number of downstream customers has been delayed, and business development has been delayed. Despite this, we remain optimistic about the results for the full year of 2020, mainly due to the following aspects: 1) the company's major bank clients' technology investment plans for the next 2-3 years have not fluctuated greatly due to the pandemic; 2) Currently, there are plenty of orders in the fintech business, and business development is still guaranteed throughout the year; 3) With the resumption of work and production in various regions, the overall operating rate of the current software business has gradually approached the same period in previous years. In summary, we believe that the impact of the epidemic is basically limited to 2020Q1, and steady growth in performance throughout the year can be expected. Investment recommendations In terms of profit forecasting, based on the performance of the mobile Internet business exceeding expectations and increasing the revenue growth rate forecast, the company's revenue is expected to achieve a year-on-year increase of 27.2%/24.0%/22.5% in 2020-2022 (4.2/3.8 pct in 20/21, respectively). At the same time, considering the high profit base in 2019 and adjusting the net profit growth rate forecast, the net profit growth rate forecast for the mother is expected to achieve a year-on-year increase of 36.4%/29.4%/27.2% in 2020-2022 (lowered separately in 20/21) 0.58/1.26 pct); Net profit for the period 2020-2022 is estimated to be 1.82/2.36/300 million yuan, respectively, and the corresponding EPS is 0.41/0.53/0.67 yuan, respectively, maintaining the “buy” rating. The company is a bank IT manufacturer that has grown rapidly in recent years and has strong comprehensive strength. The company's performance is expected to continue to grow steadily, and the decline in 2020Q1 performance will not change the positive trend throughout the year, taking into account factors such as rising bank IT investment sentiment, growth brought by medium and large banks and technology subsidiaries, and rapid progress in mobile Internet business. Furthermore, with the advancement of digital currency, the company, as a first-tier contender in the industry, is expected to participate deeply in bank-side transformation business and share the dividends of technological change in the industry. Risks suggest that competition in the industry has intensified, downstream banks' IT investment budgets have fluctuated beyond expectations, central bank digital currency implementation has progressed less than expected, and the progress of innovative business has fallen short of expectations.