Matters:
The company released its Q3 quarterly report. 20Q3 revenue was 5.2 million, up 52% year on year. Revenue for the first three quarters increased 44% year on year, 20Q3 net profit was 5.03 million, up 13.91% year on year, after deducting non-net profit of 51.82 million, up 20.94% year on year. The first three quarters returned to the mother and deduction increased 18.97% and 21.40% respectively.
Commentary:
The company's third quarterly report continues the high sentiment of the previous two quarters: this year's revenue growth was fast, and revenue growth in the third quarter accelerated further, indicating that the company's order and settlement sentiment continued to grow at a high rate. The profit growth rate was relatively slow than the revenue growth rate. Judging from the interim report, we think it should be caused by the rapid growth of the system integration business with low profit margins. However, considering that companies usually use system integration services to “drain”, subsequent operation and maintenance services for the company's integrated business will also be carried out by the company. We judge that the growth rate of the company's subsequent operation and maintenance service business with high profit margins will slowly catch up, driving an increase in profit growth.
The revenue growth rate of the entire banking information technology sector is generally good, confirming our previous judgment: Judging from the Q3 quarterly reports of many bank information-related companies that have been published so far, the industry has maintained a high overall level of prosperity, which is in line with the core logic of our previous in-depth report: banks as a whole have entered a new financial IT investment peak cycle under the pressure of the fintech innovation cycle and increased competition for external mutual funds, as evidenced by the continuing boom in the bank IT sector's performance.
It is expected that banks will continue to invest more in IT in their own operating efficiency in the future: we believe that Ant Financial's continued expansion will continue to stimulate banks to invest more in financial IT. Whether in terms of customer acquisition efficiency or credit review efficiency, Ant Financial has a greater cost advantage over traditional bank business models, and this advantage relies on technology and algorithms. Considering the current demand for localization, we believe that overall bank IT investment will maintain a high level of prosperity, while the performance of companies related to the industry chain will be firmly backed by the performance of companies involved in the industry chain.
Profit forecast, valuation and investment ratings: Based on the increase in employees at the end of 19, we believe that revenue will grow at a high level in 2020. At the same time, assuming that personnel growth will gradually slow down in the next two years, the revenue growth rate for 20-22 will be 31.1%, 12.8%, 8.5%, revenue will be 2,021 million, 2,279 million, and 2,474 million, respectively. Assuming that the overall cost rate is stable, the net profit forecast of 20 to 22 is 176 million, 213 million, 242 million, the company's current market value is about 5.2 billion, respectively. PE corresponding to 20 to 22 years is 30 times, 25 times, and 22 times, respectively. Judging from history, the valuation of the company has fluctuated high since the company went public. The PE (TTM) valuation has fluctuated 21 times to 50 times or more. The current configuration has a strong margin of safety, and the certainty that the industry in which it is located will grow from 20 to 21 is high, giving a target price range of 14-15 yuan to maintain a “strong push” rating.
Risk warning: The banking industry's investment in IT falls short of expectations; profit drag due to pressure from excessive growth in staff wages; price cuts due to increased competition in the industry.
