2022 forecast deduction of non-home net profit is basically in line with our expected wealth trend. Performance forecast: 2022 return net profit is expected to decline by 42% to 1.2-160 million yuan, deducting non-net profit by 4% 16% year-on-year to 20-230 million yuan. The decline in performance is mainly due to the substantial reduction in the fair value of one-time investment products, the delay in settlement and collection of some B-end projects under the influence of the epidemic, and the increase of R & D investment by superimposed companies, and the projected net profit after deduction is basically in line with our expectations.
Pay attention to the main points
B-end software sales and maintenance business to strive for steady progress. 1) Policy plus securities IT investment: in early January, China Securities Association issued a draft of "three-year Plan for upgrading the Network and Information Security of Securities companies (2023-2025)" to encourage qualified securities firms to invest no less than 8% of the average net profit or 6% of the average revenue in the three years 2023-2025 (vs.2008 annual guidelines not less than 3% of the average revenue) We expect to further increase the IT investment in the securities industry (according to the statistics of the China Securities Association, the industry information technology investment in 2021 is 33.8 billion yuan, 2019-2021 CAGR 28%) As the Top2 in the field of securities market trading system, the company has covered 90% of the domestic securities firms, and its leading position in the industry has been consolidated. We expect to directly benefit from the increased investment in IT. 2) accelerating the transformation of national commercial passwords: in recent years, the transformation of national commercial passwords of securities firms has been continuously promoted. Since 2015, the company has started pre-research on cryptographic algorithms, and in 2021, it has organized nearly 70 securities firms to participate in the commercial secret review and all of them have passed the evaluation, and proposed a full stack of information technology innovation to provide securities firms with solutions based on the integration of national commercial passwords and IPV6 services. We expect the gradual landing of the national commercial password transformation project, which is expected to significantly increase the company's revenue. In addition, we expect that the demand for business expansion, transformation and upgrading of securities firms under the capital market reform is also expected to promote the steady growth of the company's B-end software sales and maintenance business.
C-end securities information services contribute high flexibility in the business expansion and market upward cycle. The company has actively expanded its C-end business, and user growth has performed well. QM Statistics Company Tongxin App has an average weekly active users of + 79% / month-on-month + 19% to 1.3 million in the first two weeks of the year, while the income of securities information services for C-end customers has maintained a good growth trend (1H22 + 21% to 32.57 million yuan, accounting for total revenue ratio + 7ppt to 28%). Considering the recent optimization of macro policies such as epidemic prevention and real estate, and the overall domestic economic data slightly better than the market expectations, we expect the market to pick up or further boost the C-end business.
Performance and stock price performance are related to market turnover. In retrospect, the company's income and profits increased rapidly from 14-15 years to 18-21 years, which we think reflects the performance support of the more active securities investors to the C-end business and the expansion and upgrading of the securities system to the B-side business respectively. In terms of valuation, since the listing, the average trading of the company has been nearly 50x forward-looking for one year, and the market is active, such as Pamp E from 41x to 58x in May-June 21. Looking forward, we are optimistic that corporate flexibility will be further enlarged in the upward cycle of the market.
Profit forecast and valuation
Considering the one-off fair value adjustment, the delay in project settlement, and the increase in R & D investment, the 22-year profit will be reduced by 19% to 140 million yuan, and the performance will be thickened by policy-driven and market recovery. The 23-year profit will be increased by 6% to 300 million yuan, and the 24-year profit will be increased by 380 million yuan. The company currently trades on 49x/40x 23e/24e Pamp E; increases its target price by 62% to 190 yuan, corresponding to 58x/47x 23e/24e Pamp E and 18% upside, taking into account the boost in market sentiment; and maintains an outperforming industry rating.
Risk.
The activity of the stock market is declining, the business and customer structure is single, and the supervision of securities information system is stricter.
