Event

On March 30, the company released its 2020 annual report that its revenue rose 11.8 per cent year-on-year to HK $19.82 billion. The annual profit was attributable to an increase in shareholders' equity of the parent company of HK $103.1 to HK $613 million, and earnings per share of HK37.74 cents.

Brief comment

The epidemic promotes the demand of digital transformation, the company big data technology dividend is gradually released, and profits continue to double. In 2020, the COVID-19 epidemic led to changes in urban management, business operation, personal life and consumption patterns, and accelerated the demand for industrial digital transformation. With big data integration technology, the company actively endows smart cities, smart supply chains and financial technology scenarios. In 2020, the company realized a total income of HK $19.82 billion, an increase of 11.8% over the same period last year. The annual profit attributable to the shareholders' equity of the parent company was HK $613 million, an increase of 103.1% over the same period last year. The company has doubled its profits for three consecutive years. In 2016, through industry-university-research cooperation and centering on the needs of the industry, the company has carried out a new generation of technological research and project incubation, such as big data, and has accumulated a number of advanced technological achievements. At present, big data, represented by Yanyun DaaS, is gradually releasing its technical dividend.

Big data scene business is growing rapidly, working in synergy with China Information to dig deep into the financial ecology. The company is a big data service company with multiple scenarios. The business is mainly focused on core scenarios such as urban big data scene (smart city), industry big data scene (intelligent industrial chain), financial technology scene (Shenzhou information), innovation incubation scene (investment business) and so on.

In 2020, the company's overall revenue in Smart City was about HK $477 million, up 46% from the previous fiscal year; profits were about HK $28.66 million, up 149.4% over the same period last year; revenue from the smart industry chain business was about HK $7.411 billion, an increase of about 37.7% over the same period last year; and profits were about HK $200 million, an increase of 88.9% over the same period last year. Big data scene business, such as smart city and smart industry chain, has achieved rapid growth. Shenzhou Information, as part of the company's big data industrial ecological scene, carries out ecological coordination, business linkage and customer ploughing with big data in finance, agriculture and other industries. We will actively explore a new tripartite enabling model of "science and technology, industry and finance". In 2020, the income of Shenzhou information business is about 11.457 billion Hong Kong dollars, and the profit is about 615 million Hong Kong dollars, an increase of 104.0 percent over the same period last year.

"Yanyun DaaS" creates a new intelligent city "data base", which enables the intelligent development of the city and the transformation of industrial digitalization. As the main stage of digital economy, smart city has a huge market space. The company has been working in the field of smart city for more than ten years, and has successfully developed and incubated a number of new technological achievements, forming the advantage barrier of big data fusion technology with Yanyun DaaS as the core. Yanyun DaaS is a data mining fusion platform for big data. Its basic technology won the first prize of the National Technology Invention Award in January 2019. Without updating the original system, users can integrate and update the systems and data of different ages and lacking original factory support in the lowest cost by generating API links. Through the unique data center and data center fusion service, Yanyun DaaS can open up the urban ecological scene big data and quickly promote the construction of a new intelligent city with urban brain and digital twin city as the core. At present, the company has successfully launched large-scale projects in many provinces and cities, enabling the development of new local infrastructure, helping to improve people's livelihood services and the development of digital economy. In the future, the company is expected to continue to seize the opportunities of new infrastructure development, build a "data base" in more cities, and achieve sustained and rapid growth of smart city business.

Big data serves the intelligent industrial chain, and the e-commerce logistics business is growing at a high speed. The company has worked in the supply chain for more than 20 years and has extended big data's service to the entire intelligent industrial chain. The COVID-19 epidemic has led to changes in people's way of life, increased demand for online shopping, and the rapid development of e-commerce and online education. The company relies on its own strong supply chain management system, through the "supply chain + big data + AIoT" strategy + supply chain big data application platform KingKooData to build a complete data center to provide intelligent data services for all kinds of e-commerce enterprises, favored by e-commerce, online education and other leading enterprises. In 2020, the company's e-commerce supply chain service revenue increased by 68.77% compared with the same period last year, maintaining rapid growth. At the same time, the company is actively expanding the coverage of the industry. At present, it has initially completed the head card position in the education industry, and gained head customers such as Sany heavy Industry, Special call and Xuji Group in the field of new infrastructure and production supply chain, and the scale and scope of service are constantly expanding.

Benefit from financial innovation, the first layout in the field of digital currency, the steady development of financial science and technology scene business. In 2020, financial technology products and solutions in China's information business grew steadily, and the performance of distributed application platform Sm@rtGalaxy3.0 improved in an all-round way. Distributed application platform and distributed core business system won the bid, signed 15 financial institutions' core systems, and achieved the first overseas agile delivery. In the field of digital currency, the leading market released memory block chain platform Sm@rtGAS and digital currency (DCEP) solutions. In the process of accelerating the promotion of financial information innovation, we have successfully won the bid for customer information innovation system integration or software projects such as state-owned banks, policy banks and joint-stock banks, with a complete information innovation industry chain. In terms of industry big data, Shenzhou Information uses scenarios to serve the real economy, creates a financial science and technology ecosystem, and launches innovative businesses such as direct connection between banks and farmers, individual big data loans, bank-tax interaction, and enterprise credit evaluation, which is difficult to solve the problem of financing for agriculture, rural areas, farmers, small and medium-sized and micro enterprises.

Investment suggestion: in the future, the company will build core products around the data supply chain, accelerate the development of the data industry with data processing technology products, and build a mutually ecological software ecology. to provide customers with a full range of data software product authorization, subscription and services. It is predicted that the company's financial technology scene business will return to steady growth, smart cities and smart industry chains will maintain rapid growth, and gross profit margins of various businesses will remain stable. It is estimated that the company will achieve an operating income of HK $240.44 million in 2021-2023, respectively. The annual profit attributable to the shareholders' equity of the parent company will be HK $7.51 billion, respectively, and the previous share price PE will be HK $1.1.87 billion, respectively.

Risk tips: increased competition in the industry, changes in new infrastructure policies, rising labor costs, and lower-than-expected project landing.