The company has been focusing on the field of fintech for 20 years. It is the world's leading digital financial consulting and solution service provider, and is in a leading position in the field of core banking business systems. The company serves financial industry customers, mainly banks. With self-developed core technology and products, the company provides customers with full-life cycle IT solutions and services related to key business system areas such as the customer's core business system, credit card business system, and business center system. The company accounts for more than 90% of the software development business, providing digital finance business solutions, big data application system solutions and comprehensive value management solutions. Among them, bank digital finance business solutions have been in a leading position in the industry in recent years. Big data application system solutions have gradually entered the leading position in the industry. Comprehensive value management solutions are gradually entering the major state-owned banks, joint stock banks, small and medium-sized banks and non-banking markets, and have achieved key breakthroughs in key areas. According to the “China Banking Industry IT Solution Market Forecast (2021-2025)” and “China Banking Industry IT Solution Market Share Report, 2021” issued by IDC, the largest market size in the IT solutions segment for banking systems in China is the solution market for bank core business systems. The company ranked second in the core business system solutions market.

The digital transformation of financial innovation and banks is advancing at an accelerated pace, and there are plenty of business opportunities. In 2023, under the leadership of various financial sub-sectors, including policy, supervision, and industry associations, representative institutions first completed three batches of pilot work. The replacement path gradually deepened from peripheral edge systems to internal core systems, and will be accelerated into the comprehensive construction stage. According to the investor communication records disclosed by the company, in the first three quarters of 2023, the company has determined more than a dozen orders related to the restructuring of the core system. From the order side, there is strong demand for core business systems in the market in 2023, and it is expected that the order growth rate in the banking core business system field will be expected in the next few years. At the same time, IT solutions for China's banking industry are expected to continue to grow. According to the IDC report, China's banking IT solutions market is expected to grow to 118.56 billion yuan by 2025. In 2023 H1, the amount of sales contracts signed by the company increased by nearly 27% compared to the same period in 2022. Among them, the amount of sales contracts signed for digital finance business solutions increased by more than 40% year-on-year, and the amount of sales contracts signed for big data application system solutions increased by about 15% year-on-year. In the future, with the gradual improvement of the external economic environment and the continuous increase in industry demand, market development results are expected to gradually become apparent.

Empower overseas markets and open up new growth opportunities. The company is the first national fintech brand to go overseas, and the first Chinese company to successfully implement a core system in a large bank in Southeast Asia. It has rich overseas experience.

The company is one of the few domestic IT companies that actually use products to expand overseas, and it is scarce. The company plans to raise capital to invest in projects such as digital finance solutions, big data business solutions and technology platforms, and build a modern overseas core system to enhance the competitiveness of overseas products. As the company's overseas business develops, it is expected to open up new profit margins. As overseas products become more perfect and more stable, and the customized part becomes smaller and smaller, gross margin is expected to rise accordingly. Furthermore, overseas software licenses are a relatively stable source of income, which can contribute a lot of profit to overseas business. The company hopes that in the next three years, the profit from the overseas business will reach the same level as the domestic business, that is, the profit from the overseas business will account for half of the company's total profit.

Profit forecast and investment advice: The company's revenue for 2023-2025 is estimated to be 2,045/24.62/3,042 million yuan, and net profit to mother is 0.68/1.3/212 million yuan. The company's PS is currently at a historically low level, and as a leading manufacturer of banking core business systems, it can fully seize financial credit innovation opportunities; at the same time, opening up new markets as overseas business expands, which is expected to further help the company's profitability continue to improve. The first coverage gives a “buy” rating.

Risk warning: Competition in the domestic financial IT industry increases risks; Xinchuang's progress falls short of anticipated risks; the pace of overseas market development falls short of anticipated risks.