Incident: Hang Seng Electronics' UF3.0 next-generation OTC order system was iteratively upgraded to help Orient Securities's OTC core system complete the adaptation of all customers, all services, and full link Xinchuang to achieve Xinchuang monorail operation.
The OTC order system operates on a single track, which is a landmark replacement for Xinchuang. Hang Seng Electronics and Orient Securities began UF3.0 core system construction cooperation in 2021. They adopted the simultaneous construction model of “business system replacement” and “independent innovation in information technology”. The regular version and independent innovation version were transitioned in parallel, taking into account innovation and smooth business transition. Today, the regular version is offline, and the OTC order system has achieved single-track production operation, which means that it is truly autonomous and controllable.
Break through point by point, accelerate the implementation of benchmark cases, and innovate comprehensively with facets. Xinchuang replacement generally takes the path of “pilot first, then promotion, parallel first, then monorail”. The current single-track operation of the OTC order system, Xinchuang, will provide a benchmark case for the core system Xinchuang. On the one hand, successful case promotion will bring new customer expansion, and on the other hand, drive comprehensive Xinchuang replacement of other core business systems.
The implementation of the Xinchuang monorail case boosted confidence in autonomy and control, and released the market's demand for Xinchuang. According to the 2023 annual report, the UF product line is a Fortune Technology service. Fortune Technology's revenue was 1,734 billion yuan, up 4.27% year on year, and the growth rate has slowed. In 2023, UF3.0 signed only 2 new strategic customers, and market demand for Xinchuang has not been fully released. The OTC trading order system was the first in Orient Securities to operate on the Xinchuang monorail, providing the industry with replicable cases of Xinchuang transformation of the core system, boosting the confidence and motivation of Xinchuang in the market, and promoting the market to release Xinchuang demand.
A comprehensive independent innovation product system is expected to seize market opportunities. Hang Seng's five core systems, Xinchuang Solutions, were selected as the “Third Financial Credit Innovation Excellent Solution”. The selected solutions include a two-finance business system, investment transaction management system, broadband client transformation, comprehensive financial management and sales platform, and high-speed transactions, covering brokerage, asset management, and institutional service businesses, fully adapting to mainstream domestic software and hardware to form a comprehensive Xinchuang product system, which is expected to seize market opportunities with a first-mover advantage.
Profit forecasts and ratings. Considering that the company is in the midst of an opportunity to replace the core system Xinchuang, it is expected that after the OTC order system monorail operation case is implemented for a period of time, market confidence in Xinchuang will increase, and demand for Xinchuang is expected to be released. Maintaining the profit forecast, we expect Hang Seng Electronics' 2024-2026 revenue to be RMB 80.48, 90.18, RMB 10.051 billion, and net profit of RMB 1,693, 19.46 and RMB 2,016 billion. Corresponds to 23x PE in 2024. Maintain a “buy” rating.
Risk warning. Policy implementation fell short of expectations, demand for new IT modules fell short of expectations, new product promotion was slow, and internal management improvements fell short of expectations.