Sound operation and strong anti-risk ability: the annual income in 2020 was 1.28 billion yuan, down 9.4% from the same period last year, and the gross profit was about 380 million yuan, down 3.7% from the same period last year. The decline in revenue was mainly due to the impact of the epidemic on card business in the first half of the year, but thanks to fine management and optimization of business structure, gross profit increased by about 1.7 percentage points year-on-year to about 29.9%, operating profit was 200 million yuan, up 2.2%, and net profit was about 145.3 million yuan, down 17.7% from the same period last year. Net profit rose 5.6 per cent year-on-year to 180 million yuan. The company's current assets totaled about 2.02 billion yuan, an increase of 5.1% over the same period last year. Cash flow is abundant, liquidity and other financial indicators remain sound. The annual dividend is HK17 cents (including interim interest), keeping the dividend high.
The effect of business structure optimization is remarkable: the business income of embedded software and security payment products is 750 million yuan, down 23.7% from the same period last year. The demand for bank card issuance business slowed down mainly due to the epidemic, but the proportion of high value-added innovative products and customized products continued to increase, supporting the business gross profit margin to remain at a stable level of 24%. We believe that the scale of bank card issuance will develop smoothly in the future, but the demand for customization, high-end and personalization will continue to rise, and the company has accumulated a lot of innovative cards in recent years and has a solid leading edge in the industry. The platform and service business maintained rapid growth, with annual revenue of 530 million yuan, an increase of 23% over the same period last year, with operating income rising to 42% and gross profit margin of 38%. Among them, the revenue from digital equipment was 310 million yuan, a substantial increase of 74.7% over the same period last year, accounting for 24.1% of the total revenue. The construction of the company's digital UMV platform has been started, which is the huge digital transformation demand of the company facing the global banking industry. Based on years of core technology precipitation and resource accumulation, the company has upgraded to create a digital and ecological financial technology service platform, which can provide customers with more comprehensive financial technology products and services and open up space for the company's future digital business.
Maintain the target price to HK $2.24 and buy rating: we expect the overall card business of the company to maintain steady development, while the platform and services business is expected to maintain a high growth rate, in which data processing services business revenue is expected to grow steadily in line with the card issuance scale, digital terminal equipment business is expected to maintain a rapid growth trend, business structure continues to improve, and profit margins are improved. Considering that the "lack of core" situation in the semiconductor industry will continue from the second half of the year to next year, and the cost side of the company's chip still faces some uncertainty, we accordingly lowered our profit forecast for 2021-2022 and maintained the target price to HK $2.24. this is equivalent to 10.1 times the projected earnings per share in 2021 and 1.3 times forecast earnings after excluding available net cash, which is still 25.8% higher than the current price. Maintain the buy rating.
