The company's overall business situation remains stable and its profitability is stable

In the first half of 2024, the company achieved revenue of 2.836 billion yuan, a year-on-year increase of 0.32%; net profit to mother was about 29.89 million yuan, a year-on-year decrease of 93.30%; net profit after deducting non-return to mother was 0.136 billion yuan, a year-on-year decrease of 48.81%. Non-recurring profit and loss is about -0.106 billion yuan, mainly due to a sharp decline in income from changes in the fair value of the company's financial assets compared to the same period last year. By product, the revenue of the Fortune Technology service business line fell 16.99% year on year. The main reason was that market demand for existing products slowed, demand for credit and innovation products was not fully released, and competition intensified; asset management technology service business line revenue increased by 9.17%, achieving a steady increase, mainly due to investment transaction systems; operating and institutional technology service business line revenue increased by 3.51%, mainly from TA and valuation products; risk and platform technology service business line revenue fell 0.25% year on year, basically the same as last year; data service business line revenue fell 3.51 year on year %; Revenue from the innovative business line increased by 3.03%, mainly from Yun Yi's wealth asset management SAAS services; revenue from the enterprise finance, insurance core and financial infrastructure technology service business line decreased by 3.96%. In terms of profitability, the company's gross margin for the first half of 2024 was 71.32% (-0.61 pct year on year), and the net margin was 0.89% (-15.31 pct year on year). Looking at the cost rate for the period, the company's sales/management/ finance/R&D for the first half of 2024 were 13.74%/13.59%/-0.20%/40.96%, respectively (-0.95pct/-0.57pct/+0.18pct/-0.46pct).

Major sectors are concentrating their efforts, and new products are gradually being replaced and upgraded

At present, the financial management product line of the company's Wealth Technology Services Division has reached many customers with comprehensive financial management, financial management sales, asset allocation, CRM and other products. In addition, UF3.0 and memory transactions have completed new contracts with many customers, growing rapidly; the next-generation investment and trading system O45 in the asset management service sector continues to sign strategic customers, successfully winning bids for leading trust customers and bank financial management subsidiaries, and Xinchuang in the investment transaction sector is gradually increasing; in terms of operation and management product line, TA products have signed contracts with 30 customers and 17 have been completed. The new generation of TA has completed integration tests in a number of leading customers and will be gradually launched within the year. Twelve customers signed contracts for the valuation product, and the bid rate increased markedly. A number of leading institutions have signed new contracts for integrated products; in terms of institutional service product lines, PB2.0, LDP speed trading, FPGA futures, and Ptrade quantitative trading products all have many new customers, including PB2.0 and strategic customers signed Shinto projects; abnormal trading in the risk monitoring sector, the adaptation of the Xinchuang module progressed smoothly, and several customer contracts have been implemented; anti-money laundering products have added and replaced many customers, and new products have begun to be upgraded; the work of replacing the basic data product line in the data service business sector has progressed. Zhimu FICC, Smart Xiaofan, WarrenQ continues to iterate and upgrade; the innovative business segment Yunyi's overall business momentum is good, and revenue increased by more than 20% year over year. Affected by the slowdown in the development of the Hong Kong market in the first half of the year, Hengyun's revenue declined slightly year-on-year, but it still maintained its industry-leading market position and signed 7 new customers in half a year; the corporate finance sector product line has already set up a subsidiary in Nanjing to operate independently, and the development momentum is steady.

The equity incentive plan will be introduced again in 2024, which is expected to motivate the team. The company will issue an equity incentive plan on August 24. It plans to grant 33.35 million share of stock options to incentive recipients at an exercise price of 17.04 yuan/share. This time, a total of 1,400 people were involved, including directors, senior managers, core management, technical, and business personnel who worked for the company when the company announced this incentive plan, and other personnel that the board of directors of the company believes need incentives to improve the company's business performance and future development. The performance assessment requirements are based on net profit for 23-25, respectively, and the net profit growth rate for 24-26 is not less than 10%. The equity incentive plan released this time is expected to motivate the team and further promote healthy growth in the company's business format.

Profit forecasting

The company's revenue for 2024-2026 is 7.673, 8.427, and 9.163 billion yuan, respectively, and EPS is 0.76, 0.97, and 1.01 yuan respectively. The current stock price corresponds to PE of 30, 25, and 23 times, respectively, maintaining a “buy” investment rating.

Risk warning

There is a risk that the industry market environment fluctuates, product development falls short of expectations, customer development falls short of expectations, and equity incentive progress falls short of expectations.