Northking Information Technology Co.Ltd(002987) : record of investor relations activities from January 5 to January 7, 2022

Northking Information Technology Co.Ltd(002987)

Record of investor relations activities

No.: 2022-002

Investor relations □ specific object research \uf0a3 analyst meeting

Activity category \uf0a3 media interview \uf0a3 performance briefing

\uf0a3 press conference \uf0a3 Roadshow

\uf0a3 site visit

□ other conference calls

Yi Fangda, Cai Rongcheng, he Yicheng

China Securities Co.Ltd(601066) Jin Ge Ying Gan yangke

Name of participant: Guofu fund Chen Tianyuan

Huaxia Fund Peng Haiwei, Guo Kun research and implementation knowledge Preface

Name and surname Huatai Securities Co.Ltd(601688) Guo Yali, Zhang Yunwei, Liu Shanshan

Kaiyuan securities Chen Baojian

An Yongping, Southern Fund

Shen wanlingxin, Liang Guozhu

Huaxia Fund (Hong Kong) Li Longzhen

Time: January 5 – January 7, 2022

Venue: conference room, 7 / F, Qingzheng building, No. 25, North West Third Ring Road, Haidian District, Beijing, telephone conference

RECEPTIONIST: Mr. Fei Zhenyong, chairman and general manager of the company, Ms. Liu Ying, deputy general manager and Secretary of the board of directors, and Mr. Xu Jingbo, deputy general manager and chief financial officer

Member name

Main questions in Q & a session:

1. What is the current development of digital RMB?

Reply: the digital RMB ecosystem is divided into layer 1, layer 2, layer 2.5 and layer 3. The first layer is the people’s Bank of China, which is the only competent department for the issuance and supervision of digital RMB. The second layer is the designated operating organization layer, and investor relations include 6 large state-owned commercial banks, China Merchants Bank Co.Ltd(600036) and two third-party payment institutions. Tier 2.5 is mainly composed of small and medium-sized banks, other financial institutions and non-financial institutions (such as commercial service providers, payment service providers, etc.). In the activities, such institutions have not obtained the qualification of digital RMB operating institutions and provide digital RMB services to users through cooperation with Tier 2 institutions. The third layer is specific application scenarios, such as the Winter Olympic Games. After the successful application of the Winter Olympics, we believe that the promotion will speed up in the future, and the urban coverage, application scenarios and stakeholders will continue to increase.

2. How much impact can the comprehensive promotion of digital RMB have on the company’s revenue?

Reply: the company has the ability to provide a package of digital RMB solutions, which will bring more business opportunities to the company in the future. The company has carried out in-depth cooperation with six large state-owned commercial banks in the field of digital RMB, and its all-round delivery ability and all-round solution ability in this field have been continuously improved. We are optimistic about the future digital RMB related business. 3. What services does the company mainly provide? How much business is expected to bring to the company? Reply: financial innovation includes hardware and software. Software includes operating system, database, middleware and industry application software. The company’s track is at the application software level. In addition to the transformation needs of the customer’s original system, its new system also needs to meet the requirements of Xinchuang. The company shares the needs brought by the localization transformation of customer stock system software and the continuous digital transformation of customers. The financial industry is the key industry of credit innovation. Financial credit innovation will gradually spread from large banks to small and medium-sized banks and non bank financial institutions. The central bank, three policy banks, six major state-owned commercial banks and 12 national joint-stock commercial banks are the company’s core customers, and many urban commercial banks, rural commercial banks and non bank financial institutions are also the company’s customers. In the next 3-5 years, the investment in financial information and innovation will continue to be large, which will bring broad market space to the company. 4. How is the company doing? What are the future business plans? Reply: the company’s business is divided into information technology service business and business process outsourcing business. At present, information technology service is the main service format of the company. By the end of the third quarter of 2021, the revenue had increased by 60.77% year-on-year, and still maintained a good growth trend in the fourth quarter. Business process outsourcing business has developed steadily. In the future, the company will continue to adjust its business structure, continuously improve the proportion of information technology service business and high gross profit product line. 5. Please introduce the company’s development history and future development plan? Reply: the founder of the company was engaged in application software development and system integration driven by it at the beginning of entrepreneurship. When China’s business process outsourcing business rose, he quickly cut into the track, achieved rapid growth, and became the leading supplier in this sector. In the early stage, the company deeply participated in the whole process of IT system construction of large state-owned banks. From early demand analysis, architecture construction to subsequent development, testing and operation and maintenance, the company has accumulated rich experience and excellent talents in various fields, and realized the rapid development of information technology service business in the wave of financial technology. The company’s development strategy after listing is “capital gathers talents, talents drive technology, technology drives innovation and innovation drives development”, continuously increases R & D investment, strives to create the second growth curve, and transforms from traditional IT services to software products and solutions. By the end of the third quarter of 2021, the revenue generated by software products and solutions accounted for 16.36% of the company’s total revenue. In the future, after the software products and solutions are mature, the products will be put on the cloud and the third growth curve will be cultivated. 6. What are the company’s advantageous products? Reply: the company’s traditional advantageous products are centralized operation system (also known as process Bank), electronic file and content management system and operation risk monitoring system; The share of emerging products such as asset management system, supply chain financial system and transaction banking system has also increased rapidly. Cloud measurement management platform is the company’s current key product, which has been continuously invested for more than 5 years. The product is a general-purpose software product, which can realize public testing and cloud testing in the future. At present, more than 10 projects have been successfully implemented. In the future, the company plans to invest in the research and development of two to three new products every year according to the market demand and its own resource endowment. 7. The profit margin of the company decreased in the first three quarters of 2021. Will the profit margin increase after the company reaches steady-state operation in the future? Reply: the decline in profit margin is mainly due to the company’s increasing R & D expenditure in order to ensure long-term development and temporarily sacrificing some short-term interests for richer long-term interests. In addition, the talent competition was fierce in the first three quarters of last year and eased in the fourth quarter.

The financial IT service market is a fully competitive and highly non-standard market, with the company’s information technology services accounting for

The ratio continues to expand, the degree of productization continues to improve, and its profit contribution also continues to improve, which will drive the overall profit margin of the company to improve.

8. What is the company’s competitive advantage compared with comparable companies?

Reply: the company has the following characteristics: (1) adhering to the development concept of “focus, specialty and expert”, the company focuses on the financial industry dominated by banks. Since its establishment, the company has continuously improved its market share in the financial industry by relying on endogenous growth without extended M & A, and has accumulated a large number of existing cases and good reputation in the industry. (2) The company mainly provides information technology services and business process outsourcing to financial institutions dominated by banks, without hardware related business. High business continuity, strong stickiness and high contract renewal rate. (3) The company has been deeply engaged in the banking industry for more than ten years, realizing the full coverage of six large state-owned commercial banks and twelve national joint-stock commercial banks. In the first three quarters of 2021, the company’s revenue from the six major state-owned banks was about 65%, that from the national joint-stock commercial banks was about 15%, and that from the banking industry was about 90%. (4) The management team and core personnel are stable. Matrix management is adopted to realize integrated management, localized delivery, flat and standardized management, rapid decision-making and rapid response. (5) Rely on the self-developed enterprise digital management system (EDM System) to monitor various data, including income, cost, profit, per capita value, growth rate and so on, so as to realize the digital management, intelligent management and accurate management of the project.

9. What is the growth of the company’s IT staff? What is the personnel planning for 2022?

Reply: the recruitment of the company’s information technology service sector is basically social recruitment personnel, and they have experience in the industry. After induction training, they can start to provide services to customers. In the past two years, the number of personnel in the information technology service sector of the company has increased rapidly, about 6900 at the end of 2020, about 8100 at the end of the third quarter of 2021, and the number of personnel is still growing in the fourth quarter of 2021. The company has strong business continuity. The increase of orders and personnel in the previous year will lay a good foundation for the business development of the next year. The company has sufficient orders on hand, has strict control over the scale of personnel pool and personnel idle rate, and will timely supplement professionals according to order requirements to meet the needs of business development.

10. How long is the contract period between the company and each state-owned bank?

Reply: large state-owned commercial banks conduct bidding every two to three years. After determining the shortlisted suppliers, they sign the framework agreement. During the framework agreement period, they sign specific project contracts according to customer needs, with an average contract period of 2.5 years.

List of accessories (if any)

Date: January 8, 2022

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