Northking Information Technology Co.Ltd(002987) the company’s first coverage report: the bank is the leader in it, and the high prosperity track determines the beneficiary target

\u3000\u3000 Northking Information Technology Co.Ltd(002987) (002987)

The bank is the leader in it and gives a “buy” rating for the first time

The company is a leading bank IT company, providing technology and outsourcing services to banks and other financial institutions. Bank it has the dual attributes of high certainty and high vision. The company has high-quality large bank customer resources. In 2020, the revenue of the six major banks accounted for 65.1%, which is the target of benefit under the high boom track. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 269 million, RMB 367 million and RMB 488 million respectively, the corresponding EPS will be RMB 1.20, RMB 1.63 and RMB 2.17/share respectively, and the corresponding PE of the current stock price will be 31.9, 23.4 and 17.5 times respectively. For the first time, give a “buy” rating.

Bank it has the dual attributes of high certainty and high vision

(1) high certainty: Bank Of China Limited(601988) industry’s assets are huge and growing steadily. In 2020, the total assets of the banking industry will reach 320 trillion yuan, laying the foundation for the banking IT market. In terms of structure, the proportion of assets of large state-owned banks continued to increase, from 37.3% to 40.2% from 2016 to 2020. Large state-owned banks and joint-stock banks have a wide variety of businesses and are constantly increasing and updating. Their IT systems need to be continuously upgraded, upgraded and redeveloped, and their IT investment is rigid expenditure. (2) High vision: digital transformation is the only way for banks to reduce costs and increase efficiency. Banks take the initiative to integrate financial technology at the strategic level and upgrade from “technology enabled” to “technology led”. According to the data of China Academy of information technology, in 2020, the growth rate of IT investment of the six major state-owned banks was 34.54%, far exceeding its revenue growth rate of 4.44%, and the industry showed a high boom. In the future, financial innovation and digital RMB will bring a lot of development, testing, operation and maintenance needs. The bank’s it prosperity is expected to continue, and the investment of big banks as leaders will be greater.

With large bank customer resources, determine the benefit target under the high prosperity track

(1) have large bank customer resources: corporate customers include banking, insurance, securities and other industries. Bank customer revenue accounts for more than 90%, and the revenue of six major banks accounts for more than 65%. In the first three quarters of 2021, the company’s revenue grew by 40.3%, matching the growth rate of bank IT investment, verifying the prosperity of the industry. In the field of digital currency, the company participated early, had a deep degree and a wide range of cooperation. Relying on the customer resources of large banks, the company will definitely benefit. (2) Continuous optimization of revenue structure: the company’s business is divided into information technology services and business process outsourcing (BPO). Information technology services are mainly software and solutions, with relatively high gross profit margin (36.63% in 2019), and the proportion of revenue increased from 32% in 2017 to 54% in 2020, driving the continuous improvement of the company’s overall gross profit margin.

Risk warning: policy promotion is not as expected; The bank’s IT investment is less than expected; Industry competition intensifies.

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