Investment suggestion

Changjietong is a leading software service manufacturer for small and micro enterprises in China. We are optimistic that under the general trend of small and micro enterprises, the company has transformed into a leader in SaaS services for small and micro enterprises.

Reasons

Chanjietong comprehensively transferred to the cloud to achieve a structural breakthrough in the business. Changjietong developed from the Uyou small and Micro Enterprise Division, and developed a series of products such as T1, T3, T6, T+ and so on in more than ten years. In recent years, the company has accelerated the overall transformation of business to the cloud, and realized the transformation of cloud business in 2019: cloud business revenue increased by 289% year-on-year to 146 million yuan, and its share of revenue increased from 9% to 32%. The number of cumulative paid enterprise users increased by 39% to 157000 The single customer index has improved significantly, the annual customer unit price has increased by 50% to 1100 yuan, and the customer life cycle value has increased by 180% to 2700 yuan. We believe that the company's SaaS business is expected to enter the payback period.

We believe that the next two years will be a crucial year for the development of Changjietong cloud business. Facing the future, the company has set the goal of heavy accumulation in 2020 to achieve 400000 paying users, a heavy return in 2021, a cloud business revenue of 350 million yuan and a break-even goal, and plans the business layout and focus for the next step:

Create a smooth ecological triangle. The company plans to occupy customers on a large scale around the main SaaS products, through the drainage of flow platforms such as WeCom and nails, and the opening of ecological channels such as BABA and JD.com; at the same time, open interfaces and strengthen internal ecological construction. We believe that Ecology will bring incremental customers to the company and tap the core customers.

Smart Finance and Taxation has entered the 3.0 stage. Good accounting is based on the design concept of the integration of tickets, finance and taxation, and has the ability of mobile and intelligent services. we believe that good accounting will maintain a leading position in the field of intelligent cloud finance, with a market space of more than 6 billion yuan and a bright future.

Intelligent business layout, new retail + new trade. The company cuts into the marketing end of the enterprise with good business, and with many years of experience in serving offline customers, as well as the ability to combine online and offline, we are optimistic that the company will occupy a place in the over 10 billion intelligent business market.

Profit forecast and valuation

We maintain our profit forecast unchanged, outperform industry rating and target price of HK $15. The target price is based on the 2020 segment plus total valuation, which corresponds to 29 times 2020 and 25 times 2021 price-to-earnings ratios, with 68 per cent upside from the current share price. The current share price corresponds to 17 times 2020 earnings and 15 times 2021 earnings.

Risk

The epidemic affects the operation of small and micro enterprises; the progress of innovation business is not as expected; sales expenses and R & D expenses are high.