Hundsun Technologies Inc(600570) (600570)
event:
On the evening of November 26, 2021, the company announced that Yunying network, the holding subsidiary, acquired the summit business of finastra company for us $65 million (about RMB 421551000).
comment:
Summit is the world’s leading fund management system with rich customer resources for large and medium-sized banks
Summit is the world’s leading fund management system, covering the main trading scenarios of financial institutions’ capital business, including money market, capital market, foreign exchange trading and derivatives market. Compared with similar products, summit has the advantages of continuous delivery mode, cross asset, front, middle and back office, cloud technology route and so on. By the end of September 2021, summit had 17 bank customers in China, Hong Kong and Macao, mainly state-owned banks, joint-stock banks and large urban commercial banks, all of which were long-term contracts.
Summit will continue to contribute revenue and performance to the company, and localization is expected to boost profit margin
In fiscal year 2021, summit achieved revenue of 94.2495 million yuan in China, Hong Kong and Macao, including product license fee revenue of 48.426 million yuan and implementation revenue of 45.8235 million yuan. According to the forecast of the company’s announcement, from 2022 to 2026, summit’s revenue and EBIT will be RMB 96 million, RMB 102 million, RMB 120 million, RMB 136 million and RMB 158 million and RMB 203473 million, RMB 2047.18 million, RMB 2903.90 million, RMB 353318 million and RMB 47.3888 million respectively. Meanwhile, with the advancement of localization, the profit margin is expected to increase steadily.
The company quickly replenished the product line in the capital market and further increased its advantages over competitors in the industry
This acquisition is expected to supplement the company’s capital market product line, quickly improve the company’s competitiveness and widen the gap with competitors. 1) Rapid establishment of business advantages: the fund management system is one of the core systems used by banks, with high technical barriers. Summit has great advantages over the current competitive products of Chinese manufacturers. Through acquisition, Yunying network can quickly cut into the field of fund management system of large and medium-sized banks, complete localization transformation in the follow-up, and form a leading advantage. 2) Summit forms business collaboration with opics: Hang Seng Lirong, another subsidiary of the company, acquired opics from finastra, mainly covering the fund management system of small and medium-sized banks. After this acquisition, the company can integrate summit and opics to form synergy and fully cover the bank customer group. 3) Obtain stable business income expectation and technology upgrading: through acquisition, Yunying network has undertaken 17 customers and ongoing contracts of summit in China, Hong Kong and Macao, and will contribute profits and cash flow to the company through the annual product license fee. In addition, Yunying network will also receive finastra’s continuous update of source code and product continuous upgrade iteration support.
Investment advice and profit forecast
With the rapid development of China’s capital market, the financial IT industry has ushered in a high growth cycle. As a leading manufacturer, the company is expected to fully benefit. It is predicted that the company’s operating revenue from 2021 to 2023 will be 5.037, 6.040 and 7.199 billion yuan, the predicted net profit attributable to the parent company will be 1.472, 1.753 and 2.131 billion yuan, EPS will be 1.01, 1.20 and 1.46 yuan / share, and the corresponding PE will be 57.90, 48.64 and 40.00 times. The company’s R & D investment is large and all are expensed, and the net profit margin is low, so the PS valuation method is more reasonable. In the past five years, the company’s PS has mainly operated at 10-30 times. With the continuous promotion of capital market reform, the industry will maintain a high boom. The company is expected to enjoy a high valuation level and maintain the company’s target PS of 25 times in 2021, with the corresponding target price of 86.16 yuan. Maintain the “buy” rating.
Risk statement
The macroeconomic downturn affects the IT investment of downstream customers; The implementation of financial technology policies is lower than expected; New product R & D and marketing are lower than expected; The industry competition intensifies and the overall profitability of the industry decreases.
