Main points of investment:

Event: Heren Technology achieved operating income of 455 million yuan in 2020, an increase of 3.12% over the same period last year, and its net profit was 43.1428 million yuan, an increase of 4.63% over the same period last year. In the first quarter of 2021, the operating income was 79.3152 million yuan, an increase of 43.92% over the same period last year, and the net profit was 5.3975 million yuan, an increase of 77.1% over the same period last year.

The new product has won the bid continuously in 2020H2, and the resumption of revenue growth in the first quarter began to reflect. 1) the annual income in 2020 increased by 3.12%, which was slightly lower than market expectations, which was related to the delay in delivery during the epidemic; 2) the arrival of orders and new customers may be ahead of revenue. The new generation of hospital information system independently developed by the company after 2018 began to land after nearly two years of deep polishing, and the number of customers expanded to 6 within half a year. 3) according to the statistics of public orders, the company's orders totaled 417 million yuan in 2020, an increase of 121.8% over the same period last year. 4) the reported revenue in the first quarter increased by 43.92%, which was higher than market expectations. 2020H2 orders began to confirm the arrival of revenue.

The composition of customer hospitals was disclosed for the first time, sales of secondary hospitals began to increase, and the proportion of military hospitals continued to decline, verifying the radiation logic of previous large public hospital products. 1) the revenue share of military hospitals maintained a downward trend, and at the beginning of its establishment, the company's income was mainly military hospitals, and after 2018, with the promotion of new integrated products in ordinary public hospitals, the proportion of revenue in military hospitals continues to decline; 2) after 2020, the company cooperates with the health system to improve the landing of the "healthy city" project, including providing continuous guarantee for the smooth operation of the "Hangzhou City brain Shu Xin Medical platform". 3) most of the company's products have landed in level III and above large hospitals before, and the proportion of hospitals below level III has increased to nearly 30% after 2020, mainly due to the influence of policies such as medical federation, and further open up the new hospital market in the form of turnkey project services.

The rapid growth of R & D personnel verifies investment, and R & D capitalization will begin in 2020. 1) the company will increase the recruitment of R & D personnel after 2020, especially those who adapt to the new system development environment, the number of R & D personnel has increased from 235 at the end of 2019 to 316; 2) at the same time, the company began to capitalize its R & D since 2020, the capitalization ratio has increased from 3.54% to 41.22%, and the per capita R & D expenditure has increased synchronously. 3) We believe that increasing investment in new products during this period is in line with the natural pace of the company's development. 4) during the reporting period, the rate of sales and R & D expenses was basically stable, while the rate of management expenses decreased 2.7pp compared with the same period last year, mainly due to the decline in equity incentive amortization.

Maintain earnings forecasts and buy ratings. Taking into account Horen Science and Technology 1) to meet the information needs of large hospitals with clinical pathway as the core and covered by the whole department, the new generation of hospital integrated IT solution is rapidly promoted, and the core products are expected to maintain a high growth of more than 25% within 3 years; 2) the cloud deployment of the new generation of products is gradually improved, and the cost of implementation will be reduced, gross profit margin and net profit margin will increase after 2021, and the performance will be significantly improved. To maintain the profit forecast from 2021 to 2022, the estimated income is 5.75 yuan and 721 million yuan, and the net profit is 6675 yuan and 94.67 million yuan. The new revenue forecast is 906 million yuan and the profit is 131 million yuan. Corresponding to the current 2021 valuation of 51 times PE. Maintain a "buy" rating.