Events:

The company announced the third quarterly report of 2020: in the first three quarters of 2020, the company realized revenue of 1.001 billion yuan, down 6.66% from the same period last year; realized return net profit of 40.11 million yuan, down 29.24% from the same period last year; and realized non-return net profit of 31.71 million yuan, down 41.57% from the same period last year.

Main points of investment:

The company is full of orders, and revenue recognition policies are a drag on performance in the quarter. In terms of business, the company's revenue from the financial technology business in the first three quarters was 779 million yuan, down 4.03% from the same period last year, and the gross profit was 188 million yuan, up 9.56% from the same period last year. The revenue from the mobile marketing business was 204 million yuan, down 15.67% from the same period last year, and the gross profit was 47 million yuan, down 43.2% from the same period last year. The year-on-year growth rates of Q3 revenue, return net profit and non-return net profit were-18.33%,-67.86% and-77.11%, respectively. The decline in the company's Q3 performance is mainly affected by the following three factors: 1) the bank generally conducts centralized acceptance of the project in the middle and end of the year, and the newly implemented revenue recognition policy in 2020 changes the completion percentage recognition to completion acceptance recognition, which is a drag on the revenue of the current quarter; 2) the company provides for sales performance in the third quarter, and Q3 single-quarter sales expenses increased by 38.52% compared with the same period last year. 3) the participating company lost a lot of money, and the investment income decreased significantly, affecting the company's profit of 13.24 million yuan in the first three quarters. On the whole, the prosperity of the bank IT industry has improved, and the company's bank IT business orders are full. at the end of the third quarter, the company's inventory was 464 million yuan, an increase of 238% over the end of 2019 and 16.4% over the end of the second quarter of 2020, indicating that the company has plenty of orders on hand.

Draw up additional layout and distributed architecture to enhance the company's core competitiveness. In October 2020, the company issued a fixed increase manual, and the company plans to issue shares to no more than 35 specific investors, raising 450.0257 million yuan to invest in the "intelligent financial solution construction project based on distributed architecture". The traditional bank informatization adopts the centralized architecture represented by the IOE product portfolio, but in the Internet era, the number of bank customers and transaction volume are surging, resulting in a large number of data concurrent processing requirements, the single machine performance of the traditional centralized architecture deployment mode encountered bottlenecks, and the horizontal expansion cost is extremely high, while the distributed architecture has better flexibility, suitable for high concurrent demand, and lower deployment cost. At the same time, compared with IOE closed ecology, distributed architecture PC processors and storage, open source databases and other domestic alternative products, ecological development and self-control is stronger. At present, the use of distributed architecture for bank informatization has become a trend, which has a broad market prospect, and many core systems of banks have also been on the distributed architecture. We believe that the software solution based on distributed architecture will further enhance the company's technical strength, help the company meet customer needs, and improve the company's core competitiveness.

Profit forecast and investment rating: maintain the "buy" rating. We believe that the bank IT is prosperous, the company is full of orders on hand, and the research and development of distributed architecture-based solutions will enhance the company's core competitiveness. Based on careful consideration, regardless of the impact of additional offerings on the company's performance and equity for the time being, we estimate that the company's EPS in 2020-2022 will be 0.40 soybean 0.52 yuan 0.64 yuan, respectively, and the corresponding share price PE will be 41-32-26 times, maintaining a "buy" rating.

Risk tips: 1) the risk of uncertainty in the implementation of the company; 2) the risk that the application of distributed architecture in bank informatization is not as expected; 3) the risk that the company's performance is not as expected; 4) systemic risk.