Hundsun Technologies Inc(600570) (600570)
Key investment points
Investment Event: on November 26, the company announced that its holding subsidiary Yunying network reached an agreement with finastra to acquire finastra's summit business (referring to summit's business in China, Hong Kong and Macao) at a price of US $65 million (about RMB 421.551 million).
Acquire summit to obtain a complete product property right, customer and service system and quickly enter the field of bank fund management: summit is a fund management system solution for large and medium-sized banks under finastra, covering the main transaction scenarios of financial institutions' capital business, including money market, capital market, foreign exchange transaction and derivatives market. According to the announcement, in this acquisition transaction, Yunying network obtained the exclusive right to operate summit in China, Hong Kong and Macao, the permanent right to use the source code, documents and trademarks of summit products, and the permanent free source code update service. Finastra's existing summit customers and contracts in China, Hong Kong and Macao are also inherited by Yunying network, Meanwhile, Yunying network has the right to carry out localized development based on the source code of summit products. We believe that this acquisition transaction will: 1) supplement the fund management system product line for the company, enhance the coverage of software products in complex derivatives and structural products, especially enhance the ability to provide complete solutions for some customer groups in the financial market of large and medium-sized banks; 2) The obtained localization development rights help the company to continuously strengthen product iteration and upgrading on the basis of continuous updating of finastra source code, ensure the quality of products and services, and achieve a higher degree of localization of its solutions; 3) The company will also fully obtain 17 large and medium-sized bank customers owned by summit in China, Hong Kong and Macao and the corresponding contracts being executed, which will help the company enter the field of bank fund management more smoothly.
Leading technology advantages build high barriers, and the "Introduction" strategy forms strong business synergy: finastra is the world's leading financial technology service provider, and summit is its world's leading fund management system, covering the front, middle and back ends of bank fund management, which is used for positions, transaction processing, risk management and other businesses. Based on its strong technical advantages, summit products have advantages in large and medium-sized bank customer groups. At present, 17 large and medium-sized bank customers have been obtained in the Chinese market, and all of them have signed long-term contracts with them. According to the contracts and specific terms signed between summit and existing customers, the company predicts that the revenue of summit business from 2022 to 2026 will be USD 148074 / 1567.27/1845.19/2089.66/24294800 respectively, and the corresponding EBIT will be USD 313.74/315.66/447.76/544.79/7307000 respectively, showing a stable growth trend. We believe that "technical advantage + long-term contract with key customers" has not only built a high industry competition barrier for summit itself and rapidly improved the competitiveness of the company's technology and products, but also provided a long-term stable income expectation for the company, providing a solid foundation for the development of subsequent product R & D iterative business. Meanwhile, in July this year, the company's Hang Seng Lirong announced that it would build Hang Seng's unique fund trading system mangos based on finastra's fund trading system fushionoptics, mainly covering the fund management system of small and medium-sized banks. We believe that the acquisition of summit is an important step of the company's "Introduction" strategy in the banking business line. It is expected to form a strong synergy with the existing optics development and cooperation, realize the comprehensive coverage of large, medium and small bank customer groups, and further accelerate the company's in-depth layout in the bank's fund management system.
The structural change of bank fund management has led to a high demand for fund transaction management system. Under the wave of localization, it is imperative for banks to be independent and controllable: the income related to bank fund management transactions is one of the important sources of bank revenue. However, for the sake of risk control and stability, most of the bank's tradable funds are invested in bonds, while equity, foreign exchange The scale and proportion of investment transactions in derivatives and other fields are far smaller than bonds. At the same time, as one of the core parts of the bank's IT architecture, the high professionalism and technical complexity of the fund management system make it difficult for Chinese manufacturers to overcome the self-research barrier. There is a large gap between China's R & D level and similar overseas products, and the Chinese market is also firmly grasped by overseas products. We believe that in the era of equity, banks are expected to diversify the investment and trading field of funds, so as to increase the demand for capital trading management system, and the independent and controllable demand of bank it architecture will also usher in important development opportunities for manufacturers with independent intellectual property rights or core code use rights.
Investment suggestion: it is estimated that the total revenue of the company from 2021 to 2023 will be 5.216 billion yuan / 6.260 billion yuan / 7.324 billion yuan respectively, the net profit attributable to the parent company will be 1.485 billion yuan / 1.842 billion yuan / 2.274 billion yuan respectively, the EPS will be 1.02 yuan / 1.26 yuan / 1.56 yuan respectively, and the corresponding PE will be 56 / 45 / 37 times respectively, maintaining the "buy" rating.
Risk warning: the tightening of regulatory orientation will have an adverse impact on the company's business; The intensification of industry competition leads to the weakening of profitability; The implementation of product development and business promotion are not as expected; Internal integration and goodwill impairment risk caused by acquisition.
