Overview of events

The company released the mid-2020 report that in the first half of the year, the operating income was 664 million yuan, an increase of 0.63% over the same period last year; the net profit was 29.0727 million yuan, an increase of 30.04% over the same period last year; and the net profit after deduction was 23.9789 million yuan, an increase of 16.90% over the same period last year.

Analysis and judgment:

Bank IT income recovers rapidly, and strong orders are expected to support better-than-expected performance in the second half of the year.

On the revenue side, the company achieved operating income of 664 million yuan, an increase of 0.63% over the same period last year, and its performance was relatively stable. After the company started full resumption of work and production in Q2, the revenue side recovered. Q2 achieved revenue of 448 million yuan in a single quarter, a year-on-year increase of 30.61%, which basically made up for the drag on Q1 (year-on-year-31.86%). Specifically, the system integration related to the bank IT and the software business are divided. The former contributed 251 million yuan in the first half of the year, an increase of 27.56% over the same period last year. Judging that the customer contribution of the head bank exceeded expectations was the main reason, while the latter contributed 209 million yuan, down 16.34% from the same period last year. Software implementation and revenue recognition are still delayed, and the high probability will be gradually reflected in Q3. It is worth noting that the industry research experience shows that the demand for software orders from bank customers since the beginning of the year is very strong, judging that the new orders of H1 company are still underestimated. At present, there are three main supporting factors for bank IT demand expansion: 1) the upgrading wave of bank distributed core system is under way, and the transformation of core system leads the six major peripheral systems to follow up the supporting transformation, with a total increment of more than 50 billion, which has been gradually released in 2020; 2) under the background of Sino-US game, self-control has become a major trend, and financial innovation has been greatly promoted, which further brings domestic alternative demand. 3) the investment cycle of bank IT (hardware) is 4-7 years, which has been 7 years since the last low point in 2013, and is now ushering in a new high economic starting point. In addition, considering the active output of China Construction Bank Corporation and Jianxin Jinke, which are closely related to the company, in the new cycle of bank IT, it is judged that the company has achieved significantly better business increments than the industry, and the full-year performance is expected to exceed expectations.

Add code to develop iterative new products, accelerate the layout of mobile Internet services

In 2019, the company has greatly increased its research and development, and its R & D investment for the whole year has increased by 29.14% compared with the same period last year, while 2020H has still increased its R & D investment by 6.31% despite the great impact of the epidemic, indicating the company's determination to accelerate the iteration of new products. The R & D achievements in the past year include the development of new credit business system (which has been applied to Postal Savings Bank of China, etc.), the optimization of core business system (in which the data migration platform has been applied to CDB, etc.), and Ruimin ticket pay (which has been applied to Pudong Development Bank, etc.). It is expected that some new products will gradually realize their performance in the second half of the year. In addition, the company will implement a private stock offering in the second half of the year, raising a total of about 450.0257 million yuan, mainly for the research and development of intelligent financial solutions based on distributed architecture, which will further deepen the technical and product advantages of financial IT. On the other hand, there is also a bright spot in the layout of the company's mobile Internet under the diversified competitive strategy. Although the business revenue is under short-term pressure (- 21.78% compared with the same period last year), its fast-reading technology is rapidly internationalizing its layout. Fast reading is mainly engaged in mobile advertising marketing, aiming at long-tail traffic, widely covering downstream media resources, and its mobile advertising marketing solution enjoys a high reputation in the industry. It is expected to gradually participate in the international strategic layout of head Internet manufacturers in 2020.

The year 2020 is not only the starting point of a new round of bank IT investment business cycle, but also the foundation year of the central bank's digital currency (DCEP). The demand for bank IT system transformation brought about by DCEP will bring transformational opportunities for the industry. In the General part of Digital currency: space and Framework based on Paper currency substitution, we believe that DCEP will bring huge demand for IT transformation and operation and maintenance mainly in the central bank side, the bank side and the public side. The bank-side system is the focus of the transformation of the digital currency ecology, and it is expected to belong to conditional bidding. For qualified bank IT service providers, the open market is huge, and it is estimated that the corresponding space of the bank-side IT system is expected to reach 93.6 billion yuan / year, and the bank IT manufacturers at the head are expected to stand out. We believe that as a first-tier competitor in the industry and a large number of large and medium-sized high-quality bank customers, the company is still expected to participate deeply in the bank-side business brought by digital currency (such as core system interface transformation, etc.). Share the dividend of technological change in the industry.

Investment suggestion

The profit forecast remains unchanged, and the company's revenue is expected to achieve 22.5% year-on-year growth of 22.5% from 2020 to 2022, and homed net profit from 2020 to 2022 will achieve a year-on-year increase of 36.4%, 29.4% and 27.2%. It is estimated that the net profit of homing from 2020 to 2022 is 1.82 billion yuan, respectively, and the corresponding EPS is 0.41, 0.53 and 0.67 respectively. The company is a fast-growing bank IT manufacturer in recent years, with strong comprehensive strength. Taking into account the bank IT investment momentum upward, large banks and technology subsidiaries bring increments and other factors, the company's full-year performance is expected to continue high growth, maintain the "buy" rating.

Risk hint

The competition in the industry intensified, the IT input budget of downstream banks fluctuated more than expected, the progress of the central bank's digital currency landing was not as expected, and the innovation business was not promoted as expected.