Focus on financial IT and software development, steady performance growth. From the early software outsourcing to the current focus on two major businesses, one is financial informatization, including bank IT core system, bank IT testing and insurance IT;, and the other is software development, including intelligent terminal informatization, smart energy, supply chain management software and so on. The company's performance has grown steadily in recent years, with an average annual compound growth rate of 33.71% and 32.44% respectively in the past five years (2013-2018).
In the new era of bank IT, the change drives a new round of investment of small and medium-sized banks. Bank3.0 is the transformation of bank IT architecture from chimney architecture to unified platform, from account-based architecture to customer ecological management. In recent years, changes in regulatory and business environment have brought greater survival pressure to banks, especially small and medium-sized banks. On the one hand, the background of interest rate marketization and strict supervision, and on the other hand, the impact of the mobile Internet wave, all put forward higher requirements for its differential competitiveness. Banks are in urgent need of reforms to break through the limitations of traditional channels and provide more flexible business services, which are closely related to a more efficient bank IT system architecture.
Join hands with Ant Financial Services Group to create a new generation of bank IT core system. Ant Financial Services Group Yun Xin invested 5% of the shares in May 2018, and the two sides reached strategic cooperation. In March this year, the two sides also formally launched a new generation of distributed financial business core platform for the domestic financial industry in Nanjing. The new generation of distributed system breaks the previous chimney architecture, based on Ant Financial Services Group's latest research and development achievements of IaaS, PaaS, BPaaS and mPaaS, and combines the years of accumulation of Runhe software in business scenarios and channels, which can effectively solve the problems of data isolated island, high operation and maintenance costs, poor user experience, lack of product innovation capability, and enable small and medium-sized banks to meet the changes in the Bank3.0 era. At present, Taizhou Bank, Changshu Bank and other banks have upgraded the bank IT system.
For small and medium-sized banks, it is a general trend to abandon IOE and choose independent distributed cloud services. We believe that, on the one hand, although the traditional IOE architecture is widely used by large financial enterprises, its operation and maintenance costs are too high to meet the needs of business flexibility of small and medium-sized banks, and the new generation of distributed core can solve these two problems well. On the other hand, the independent R & D capability of small and medium-sized banks is relatively poor, and they are strongly dependent on the technical support of professional bank IT system suppliers. At the same time, they also have a strong demand for efficiency improvements brought about by the application of new technologies such as AI and big data. This is the opportunity for the company. Ant Financial Services Group's advantages in the IaaS and PaaS layers complement each other with the company's application on the SaaS side and a deep understanding of the banking business, and jointly help the bank upgrade the IT architecture.
Profit forecast and investment advice: we predict that the company's EPS in 2019-2021 will be 0.50,0.64,0.81 yuan per share respectively. At present, the company's share price corresponds to a price-to-earnings ratio of about 22 times 19-year EPS, which is lower than that of similar companies. We are optimistic that under the cooperation between the company and Ant Financial Services Group, the new generation of distributed core helps small and medium-sized banks upgrade the prospect and competitiveness of the IT architecture. With reference to the comparable company valuation, we think that we can give 30-36 times 19-year price-to-earnings ratio, corresponding to a price range of 15.00-18.00 yuan, giving a "better than the big market" rating.
Risk hint: the education process of new business market is longer than expected.