Key investment points

The B-side has a solid foundation, and the C-side has potential

On the B-side, the “Tongdaxin” software brand is highly recognized by institutions. The company has a leading market share in the brokerage trading system market. Currently, it has covered more than 90% of domestic securities companies with brokerage business qualifications. C-end, with a perfect product system. Securities information service charging terminals are mainly divided into three categories: basic quotes, professional research, and high-end decision-making, which can meet the needs of different types of investors. The mobile app Monthly Activity ranked 7th among the Tripartite Securities apps. In 2018-2023, the securities information service business had a CAGR of 20.9%, growing rapidly.

The “9.24” market led to a doubling of turnover

Since September 24, 2024, the turnover of the Shanghai and Shenzhen stock markets has increased significantly, from 524.4 billion yuan on September 23 to 3.2 trillion yuan on October 8, and 2.4 trillion yuan on November 7. We believe that if monetary policy and fiscal policy continue to boost the domestic economy and improve confidence in the future, market turnover is expected to remain high, and non-bank IT is expected to continue to benefit. As far as the company is concerned, under this round of market conditions, the B-side business is benefiting from improvements in downstream brokerage operations, and the budget is expected to increase. The C-side business benefits from incremental investors entering the market and active transactions, and is flexible. New investors enter the market, and under incremental space, there are more opportunities for business growth, which also brings opportunities for changes in the industry pattern. Compared with Flush, Compass, and Oriental Wealth, the increase from October 8 to now is small. The company's increase was 25.1%, while the comparable companies mentioned above have risen 69.5%, 57.1%, and 47.8%, respectively. Considering the company's small size, high manpower efficiency, and abundant capital, we believe that the company still has good room for growth and flexibility. In the current extremely active market, if the company can increase market investment and upgrade products, it is expected to gain incremental market and expand market share.

Xinchuang solidified the foundation, and AI opened up space

The company attaches importance to technology, and R&D expenses dominate the cost of the period. As the company continues to develop and enrich its product matrix, the market is expected to open up further. 1) On the side of Xinchuang, through the accumulation of coding, security, and cryptography, the company proposed full-stack information technology innovation in the field of data security technology to provide securities companies with solutions based on commercial secrets, Xinchuang, and multi-terminal collaborative digital platforms. On mobile, Tongdaxin HarmonyOS online trading system software V1.0 was launched on the Huawei Hongmeng App Store. Future features will be gradually improved, and it is planned to achieve the same functionality as Android and iOS by the end of 2024. 2) In terms of AI, the company continues to conduct in-depth research in fields such as generative AI and language models. The existing products ask Xiaoda to continuously optimize natural language understanding (NLP); the TendencyGPT financial model has obtained in-depth national synthesis and filing, and the mobile app and PC public software have been tested, enriching intelligent financial service channels.

Profit forecasting and valuation

The company's revenue is expected to reach 0.451, 0.523, and 0.607 billion yuan in 2024-2026, +3.86%, +15.75%, and +16.18% year-on-year; net profit to mother is 0.326, 0.353, and 0.417 billion yuan, respectively, or +4.86%, +8.34%, and +18.10%. Using Tonghua and Compass as comparable companies, the company's corresponding PE values for 2024-2026 were 101, 93, 79, and the average corresponding PE values of comparable companies were 198, 121, 94. First coverage, giving a “buy” rating.

Risk warning

Competition risk, capital market risk, R&D risk.