Hang Seng Electronics: How the financial IT leader will benefit from the year of capital market reform

2019/12/31 15:03:07 Source: Tianfeng Securities 2019/12/31 15:03:07

Reform and pilot take over supervision, three trends go hand in hand, bringing room for growth for the industry

Recently, a large number of reforms and new business trials have appeared in the capital market, and it is expected to gradually take over the industry themes that have focused on regulation and rectification in the past few years to drive development. Looking forward to next year, we believe that the three major trends of industry technology upgrade trends, policy-driven reforms and pilots, and downstream scale expansion will bring broad growth space for the financial IT industry. Among them, we believe that the short-term business flexibility is policy-driven reforms and pilots, but technological upgrades and downstream expansion will continue to inject new impetus into the financial IT industry in the medium and long term.

Cloud and blockchain applications on core systems help upgrade financial IT business models

The most obvious in the industry technology upgrade trend is the upgrade of cloud and regulatory technology on core systems. In December 2019, Hang Seng Electronics Together with Alibaba Cloud, they jointly launched the NewCloud financial solution in the financial sector, providing a cloud-native solution for the cloud of financial institutions' core systems. On December 30, at the meeting of the People's Bank of China's Fintech Commission to deploy key tasks in 2020, the introduction of technical supervision rules for personal financial information protection and blockchain was included as one of the key tasks. Scale application. The gradual use of new technologies will be a long-term process, but new technologies including cloud and blockchain have unique potential business models that are different from the current mainstream project system. While reducing performance volatility, it is expected to further tap downstream customers Demand for innovation.

Frequent policies, financial IT industry directly benefit from innovative policies

In just two months of November and December, major policy reforms such as expanding stock index options, allowing wealth management subsidiaries to open stock accounts, MOM products, and the New Third Board reform have been promoted. The policy progress will directly promote the rapid follow-up of downstream financial institutions, which will generate a large number of new or reformed IT systems in a short period of time.

Taking MOM products as an example, the Hang Seng integrated solution includes investment transaction management, institutional counters, investment research management, investment and investment recommendation management, unified valuation, investment consultant management, and post-investment analysis management. It is expected to correspond to the parent manager. With a scale of several million yuan, the overall market space is expected to be several hundred million yuan.

Benefiting from the opening of foreign capital and customer transformation, the downstream scale of financial IT continues to expand

In the "Opinions on Further Utilizing Foreign Capital" issued in November, it was mentioned that in 2020, the restriction on the foreign investment of securities companies and fund companies not to exceed 51% will be lifted. We believe that this will further drive foreign financial institutions to enter China , Bringing new requirements for financial IT systems. At the same time, the transition of various financial institutions to wealth management is becoming more and more obvious. It will stimulate the focus of financial IT construction to spread from the core system that supports business to the peripheral system that supports services and management, driving the industry to expand. The expansion of the industry's scale will not spur the rapid growth of financial IT manufacturers' performance, but in the long run, it will provide financial IT manufacturers with more test fields and a wider market space.

Investment Advice

We are optimistic that the company will benefit from the development of the fintech industry for a long time and maintain its profit forecast. It is expected that the company will achieve net profit of 8.07 / 11.05 / 1.373 billion yuan from 2019-2021 and maintain a "buy" rating.

Risk reminder: policy implementation progress is less than expected; industry new technology adoption progress is less than expected; regulatory policy changes

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