Introduction to this report:
IT investment by big banks increased 33.50% year-on-year, exceeding market expectations. The company's performance will soon explode as the main undertaker of demand from major banks
Key points of investment:
Maintain the “increase in holdings” rating and raise the target price to 64.45 yuan. Based on industry research and observation of banks' IT investment, we maintained our 2021 profit forecast and raised our profit forecasts for 2022 and 2023. We expect the company's EPS for 2021-2023 to be 1.05, 1.90 (+0.22), and 3.09 (+0.53) yuan, respectively. The target price was raised to 64.45 yuan to maintain the “increase in holdings” rating.
IT investment by major banks increased 33.50% year over year, becoming the main source of demand. The average IT spending growth rate of the six major banks in 2020 was 33.50%. Among them, the IT spending growth rate of ICBC, Agricultural Bank, and Bank of China was over 40%. The reason for this is that an important catalyst for the new banking IT boom cycle is the increase in the penetration rate of Xinchuang, and the penetration of Xinchuang in the financial industry often begins with large banks. We judge that the growth rate of IT spending by large banks is expected to continue to be higher than that of small and medium-sized banks in recent years, becoming the main source of IT demand for banks.
The market sentiment of third-party solutions has been verified. After analyzing the growth rate of IT personnel and the growth rate of IT investment in banks, we found that the total IT investment of major banks other than Postbank (not disclosed) increased 36% in 2020, but IT staff increased by only 7%. It shows that the direction of bank IT investment is not entirely self-construction. Among them, the proportion of solutions should have clearly increased in 2020 compared to 2019, and the market sentiment of third-party solutions has been verified.
Targeting big bank customers, performance is about to explode. In 2020, the revenue of bank customers with assets exceeding trillion dollars accounted for 63.05% of the company's total revenue revenue, an increase of 12.91% over the previous year.
2021Q1 on-hand orders increased 110.12% year-on-year. The company accurately undertook the release of IT demand from major banks. An abundance of on-hand orders is a favorable guarantee for the company's future high performance growth.
Risk warning: the progress of innovation in the industry fell short of expectations; risk of rising labor costs