\u3000\u3000 Yusys Technologies Co.Ltd(300674) (300674)
Ping An View:
The company is in the first echelon of Bank Of China Limited(601988) it, with strong comprehensive strength and relatively complete product line: the company was established in 1999, and its business scope has been continuously expanded through extensive M & A and endogenous cultivation. At present, the company can provide IT products and solutions required by all links of bank operation, including business, channel and management. IDC report shows that the company ranks second in the overall IT solution market of the banking industry, and has long been at the forefront of the market in credit operating system, supervision and compliance management, data and Internet banking and other market segments, with strong comprehensive competitiveness. In addition to bank customers, the company is also actively expanding the IT solution market for non bank financial institution customers. Since 2021, benefiting from the accelerated digital transformation of the banking industry, the company’s revenue has increased rapidly and its profit performance has been relatively stable. In the first three quarters of 2021, the company achieved an operating revenue of RMB 2.053 billion, a year-on-year increase of 26.59%; The net profit attributable to the parent company was 155 million yuan, a year-on-year increase of 13.77%.
Traditional businesses such as software development are growing steadily, and innovative business is becoming a new growth engine: software development and services are the company’s main source of revenue. Thanks to the growth of the bank’s it endogenous demand and the acceleration of the deployment of information innovation projects, the revenue of this sector has achieved steady and rapid growth. In the first three quarters of 2021, the revenue scale of the company’s software development and service business increased by more than 30%. In addition to traditional businesses such as software development and system integration, the company is also exploring new business models, and its innovative business has also made positive progress. In the first three quarters of 2021, the growth rate of the company’s innovative business revenue exceeded 50%, significantly higher than the overall revenue growth of the company. Online loan operation is the main body of innovative business. The company builds a financial ecological platform for customers and benefits from the results of platform operation. In the innovative business, the company’s positioning has changed from supplier to partner, building and operating a platform with customers, “operating first and then paying”. This strategy changes the customer’s IT department from cost center to profit center, and improves the enthusiasm of customer platform construction. Through the sharing of operating results, the company has improved the sustainability and growth potential of revenue. In addition, the financial cloud and smart outlet businesses in the innovative business also show strong competitiveness.
Bank it still has great room for development, and the company is expected to benefit from the rising prosperity of the industry: IDC predicts that the compound growth rate of bank IT solution market scale will reach 18.73% from 2021 to 2025. From the perspective of trend, the prosperity of the industry will continue to rise, mainly in three aspects: first, the regulatory authorities will maintain a positive attitude towards financial technology as a whole, and relevant guiding policies are also being introduced one after another; Secondly, new technology, new architecture and new competitive environment are also bringing practical and internal needs to the development of bank it. Finally, the application of digital RMB is also expected to bring new business opportunities to the company. Since 2020, the central bank has continued to promote the pilot work of digital RMB. As the main media of the central bank’s digital currency, commercial banks and other IT systems will be upgraded accordingly. As one of the suppliers, the company has accumulated in operation and payment, and will also obtain market opportunities in this field in the future.
Investment suggestion: the company is one of the manufacturers with relatively complete bank IT product line layout. It has been in the forefront of the bank IT solution market for more than ten years and has a clear growth path. On the one hand, the company carried out innovative operation business, breaking the traditional business model of bank IT outsourcing; On the other hand, Bank Of China Limited(601988) IT investment will also enter a rapid growth range driven by financial information innovation and financial technology policies, and the company will also benefit from this round of digital tide. We expect that the company’s EPS in 2021, 2022 and 2023 will be RMB 0.72, RMB 0.92 and RMB 1.18 respectively, corresponding to the PE of January 17 will be 37.5x, 29.4x and 22.9x respectively. We are optimistic about the company’s track and new model exploration, covering it for the first time and giving it a “recommended” rating.
Risk tips: (1) risk of intensified industry competition: the company is already in the first echelon of the industry, but if the leading manufacturers in other segments of the industry accelerate their horizontal expansion or increase the number of new competitors, the industry competition will intensify, and the penetration rate of the company may be lower than expected. (2) Risk of hindering the progress of innovative operation business or overseas business: the company positions innovative operation business and overseas business as an important development direction in the future, and increases investment to layout and set up branches in the Southeast Asian market. If the progress of innovative operation business slows down, the competition in the Southeast Asian market intensifies or the outbreak of epidemic and other external factors, the company’s performance growth will be less than expected. (3) Risk of bank IT investment falling short of expectations: the company’s main customers are financial institutions dominated by the banking industry. If the IT investment of downstream banking industry falls short of expectations, the company’s operation will also be affected.
