Investment Summary:

Company: bank IT leader in traditional and innovative business two-wheel drive development

The industry leader, the product line layout is perfect. The company has been ploughing banking software for more than 20 years and has achieved a comprehensive product layout, and the multi-product line model can alleviate the impact of order fluctuations in individual product lines. The company's credit, supervision, data and channels of the four major product line industry market share leading.

Make efforts to innovate business and explore a win-win cooperation model. In recent years, the company began to layout innovative operations, including digital credit, marketing operations and technology operations and other modules. The innovative business and the cooperation mode of the bank have changed from the traditional Party An and Party B to the partner, and the gross margin and payment rhythm are better than the traditional business. The steady growth of the company's software business and system integration business ensures market revenue, rapidly increases the share of innovative business, improves the quality of corporate profits, and promotes rapid development.

Industry: triple factors drive the bank IT demand outbreak industry into a new round of business cycle

Policy and technology have helped create financial information, and the demand for IT of banks has increased significantly. Policies related to financial innovation have been introduced one after another, and a wider range of three pilot projects have been launched. At the same time, the maturity of distributed technology promotes the overall upgrade iteration of IT system. Banks, as the "vanguard" of financial information innovation, have a high degree of participation, which catalyzes the continuous upsurge of corresponding IT demand.

The development of data element market is driving into the fast lane, and the entry of data assets into the table brings incremental bank IT demand. Over the past five years, the number of financial data factor procurement projects has grown at a compound annual rate of 40%, and the number of banking data procurement projects accounts for about 70% of the entire financial industry. Under the guidance of the policy, many banks actively carry out the practice and exploration of the application of data elements. If a feasible plan is introduced and approved by the market and rules and regulations, the large-scale entry of data assets into the table will bring a large number of data value evaluation and data asset management needs, bank IT construction is expected to benefit.

Digital RMB is in the ascendant and has become a medium-and long-term opportunity in the industry. The research and development and promotion of digital RMB is of strategic significance. In the medium to long term, the gradual landing of digital currency B-end and G-side scenarios will bring incremental demand for the whole banking IT industry.

Core competence: product layout, correct and innovative customer structure, balance and stabilize fluctuations.

Product advantages: with the help of Baidu, Inc. to expand AI financial application, fully release the potential of data elements. Based on the strategic investment relationship with Baidu, Inc., Yuxin gives priority to internal testing experience and access to the comprehensive ability of "Wen Xin Yiyan", and explores the deep integration of the AI model and financial application scenarios. In the short term, the demand for AI applications in marketing scenarios such as smart customer service and mobile banking will be released. In the medium term, the improvement of the processing efficiency of unstructured data brought about by large model technology will promote the iterative upgrading of products related to data asset management business. In the longer term, large model technology will not only be used for externally delivered projects and products, but also enable internal product development to further improve the company's medium-and long-term product development efficiency and operational efficiency.

The advantage of Xinchuang: actively promote the ecological construction of Xinchuang and build the supporting capacity of national production. The company continues to promote the product development under the Xinchuang framework, forms the national production support capacity, strengthens the cooperation with the upstream and downstream partners of the industrial chain, and jointly creates independent controllable solutions.

Customer advantage: the structure is balanced to stabilize the income fluctuation, and the experience of different customer groups can be transferred. The company's customer structure is balanced, which can stabilize the impact of different customer investment cycles on company income, can benefit from the long tail effect of Xinchuang and digital transformation, and the experience accumulated by different customer groups can be transferred to each other.

Digital currency: multi-link in-depth layout, with first-mover advantage. The company has an in-depth layout in many aspects of the digital RMB, and plans to integrate and centralize the digital currency-related capabilities and product modules. When the relevant policies bring demand, the company can have a first-mover advantage.

Overseas business: embrace the vast Southeast Asian market, overseas business can be expected in the future. Taking advantage of financial science and technology to go out to sea and lay out the Southeast Asian market, the epidemic has promoted the vigorous development of the digital economy in Southeast Asia. As overseas customers accept license fees, the gross margin of overseas business is higher than that of domestic business. In the long run, overseas business is expected to improve the company's profitability and become a new growth point of performance.

Investment suggestion

The increase of bank IT investment promotes the prosperity of the industry, while the traditional software business and innovative operations drive the company's performance growth and the improvement of gross profit margin and profit margin. With the fine management of the company, the rate of management and sales expenses will gradually decline. The estimated net profit of 2023 is 603 million yuan, which is valued at 30 times and a "buy" rating corresponding to the target market value of 18.09 billion yuan.

Risk hint

The risk of market competition, the risk of the relative concentration of service industry and sales customers, the risk of technology and product development quality, and the risk of loss of core technical personnel.