Event: the first quarter of 2015: 2015Q1, the company realized operating income of about 57.09 million yuan, an increase of 128.0% over the same period last year; operating profit of about 1.28 million yuan, an increase of 6.8% over the same period last year; and net profit belonging to shareholders of listed companies was 2.74 million yuan, an increase of 11.9% compared with the same period last year.

Comments:

The system integration business promotes the rapid growth of revenue, and the Internet financial business continues to advance. 2015Q1, the company achieved revenue of about 57.09 million yuan, an increase of 128.0% over the same period last year, mainly due to the rapid revenue of system integration business and the increase in the number of software development and service contracts executed by Q1. Q1 realized a net profit of 2.74 million yuan belonging to shareholders of listed companies, an increase of 11.9% over the same period last year, and the performance was basically in line with expectations. Q1 company has completed the reconstruction of the underlying code of the new generation credit management system, and the loan accounting subsystem, enterprise credit reporting subsystem, personal credit reporting subsystem, supply chain financing subsystem and collateral management subsystem have been gradually put into use in the market; at the same time, the company has also invested in the establishment of an Internet financial service company, and plans to set up a Zhixin network company to engage in inclusive financial business. We expect the company's revenue to continue to grow rapidly in 2015.

The increase in the proportion of low gross margin business leads to a decline in gross profit margin and a rapid increase in management expenses. The company's Q1 comprehensive gross profit margin is 46.0%, down about 5.3 percentage points from the same period last year. We estimate that the main reason for the decline in gross profit margin may be the increase in revenue share brought about by the rapid growth of the system integration business with low gross profit margin (16.8% gross profit margin in 2014).

Due to the increase in the number of sales and market development and maintenance activities, Q1 sales expenses increased by 53.9% compared with the same period last year, while the increase in investment in fund-raising projects and new product research and development increased management expenses by 109.8%. On the other hand, the expense rate has decreased to a certain extent, with a combined decrease of about 6.6 percentage points, and it is expected that the company's sales management expense rate for the whole year will be basically the same as that in 2014.

Accounts receivable increased slightly, operating net cash flow worsened, and financial risk was smaller. By the end of the first quarter, the balance of the company's accounts receivable was about 100 million yuan, an increase of about 20 million yuan over the beginning of the year. The net operating cash flow of the company is about-36.04 million yuan, which is about 9.51 million yuan less than-26.53 million yuan in the same period last year, and the operating efficiency has declined. The company currently holds monetary funds of about 240 million, with plenty of cash on hand and less financial risk.

Be optimistic about the development potential of the company's Internet financial business, and give it an "overweight" rating. We predict that the company's EPS from 2015 to 2017 will be 0.59,0.73 and 1.02 yuan respectively, with an average annual compound growth rate of 21.9% in the next three years. The company's current share price is 319.55 yuan, corresponding to a price-to-earnings ratio of about 542 times earnings in 2015, with a high short-term valuation. Considering the rapid progress of the company's Internet financial business and great potential for future development, we give the company a "overweight" rating with a six-month target price of 324.50 yuan, corresponding to a price-to-earnings ratio of about 550x in 2015.

Major uncertainties. The management risk brought by the rapid expansion of scale; the investment risk of new projects; the risk of intensified market competition; the risk of relying on the banking industry.