On August 26, Yusys Technologies (300674) released the latest half-yearly report. During the reporting period, the company's core business revenue and profit showed a Y-o-Y growth trend. The operating income during the first half of the year was RMB 1.077 billion. Net profit was RMB 124 million with a year-on-year increase of 71.41%, and the net profit attributable to shareholders of listed companies was RMB 129 million with a year-on-year increase of 59.77%.

From the perspective of revenue structure, the contribution of the innovative solutions for businesses to revenue increased significantly in 2019, an increase of RMB 26 million compared to the same period in the previous year, an increase of 164.63%, highlighting the value of innovation and transformation in the face of the pandemic.

With the outbreak of the pandemic in 2020, the demand for contactless services in the banking industry and other financial industries has surged, and businesses such as cloud services have grown rapidly. In the process of the transformation of banking financial services from semi-online to full-online process, the immense value of the financial technology sector represented by Yusys Technologies, is highlighted.

Comprehensively develop the banking industry and grow steadily

During the first half of 2020, there was a new round of explosive growth in the traditional business sector. After more than 20 years of development, Yusys Technologies has become one of the largest banking IT solution providers in China with a comprehensive product layout and business scope covering nearly all banking related fields. It has consistently maintained a leading position in credit management, business intelligence, regulatory reporting, network banking and other segments and solutions.

During the first half of the year Yusys Technologies' credit business captured the market transformation opportunities and achieved explosive growth by virtue of its industry leadership and first-mover advantage. Yusys Technologies' distributed micro-service credit product–which empowers financial credit creation facilities–has taken the lead in acceptance by numerous banks, and there are many more requests in the pipeline. Moreover, the company's credit product landscape has been extended from credit-operation management to post-loan asset management, and the complete credit product line has enabled the company to showcase its unique competitive advantages.

In the field of data business, during the first half of the year Yusys Technologies made breakthroughs in research and development and won large bids for data center and emerging data application products, including precision marketing and data modeling. Moreover, in recent years it has tendered the winning bid for the largest urban commercial bank reorganization and big-data platform merger project, among other achievements.

The regulatory business is a field in which Yusys Technologies' product system has become increasingly mature, encompassing all submissions to the China Banking and Insurance Regulatory Commission, the People's Bank of China and SAFE. Consequently, the company's market share has continued to expand. During the first half of the year, the company won bids for several major joint-stock bank supervision projects and provided services to the national financial regulatory agency for the first time.

Although the expansion of overseas business has been affected to a certain extent due to the Covid-19 pandemic, the company has overcome numerous difficulties and has continued to advance its overseas market layout in an orderly manner, while ushering in new breakthroughs. In the Singapore market, the company signed a contract with a Chinese state-owned bank to provide a supervisory statement reporting platform system, thus attaining the first breakthrough of the company's overseas market. In the Indonesian market, the company signed a letter of intent with local customers for a cooperative digital banking project, which will be officially launched and made operational during the first half of next year. Moreover, the company continues to integrate resources with partners such as Huawei, NTTDATA, and OCBC Bank Singapore to jointly develop the market of Southeast Asia. During the next five years, the expansion of overseas markets will be an important element in the company's general development strategy.

To date, Yusys Technologies has served more than 750 financial institutions in China and overseas and has provided services to 115 of the "Top 1000 World Banks." Its customers include the People's Bank of China, China Development Bank, two non-commercial banks, six major state-owned commercial banks, 12 joint-stock banks and more than 100 regional commercial banks.

IDC forecasts that the average compound annual growth rate of China's banking IT solution market from 2019 to 2023 will be 20.8%, and by 2023, the market size will reach RMB 107.15 billion. The current competitive landscape of the industry is relatively fragmented, and the top five vendors only occupy 17.8% of the market. Thus, with the decrease in the proportion of hardware and integration, increase in the proportion of software, the constant development of financial technology, and the focus of downstream customers to branding, as an industry leader, Yusys Technologies is expected to fully benefit from the increase in market share brought about by the increase in industry concentration.

Transformation value—innovative business releases new momentum

In the new round of intelligent upgrade of banking financial technology, Yusys Technologies has seized new development opportunities in the industry by leveraging Yusys Cloud that has been developed for more than 10 years. The company has actively pioneered its profit model through the cooperation model of joint operation with financial institutions and mutual benefit. In 2019, Yusys Technologies' innovative solutions for businesses achieved initial results, with revenues of RMB 76.045 million, a Y-o-Y increase of 561.73%. During the first half of the year, revenue from innovative operations increased by 164.63%, making it the company's second-largest growth engine.

The gross profit margin of innovative solutions for businesses is also high. During the reporting period, thanks to the expansion of the company's operating platform service revenue, daily software development and maintenance, and the high reuse rate of operating personnel, the gross profit margin of this sector with a year-on-year increase of 16.43%, rising to 78.31%, thus verifying the effect of the company's transformation through innovative solutions for businesses. Innovative solutions that are less affected by the pandemic and have higher gross profit margins, rapid growth and increased revenue share have also helped increase the company's gross profit margin and improved the general structure of operations. During the first quarter of the year, Yusys Technologies' gross profit margin increased by 4.60% from the same period of the previous year, reaching 36.48%.

The model for cooperation based on financial cloud services is an important part of the company's future transformation. According to the report "China's Financial Cloud Market (Second Half of 2019) Tracking" published by the IDC, Yusys Cloud ranks second only to Alibaba Cloud in the banking cloud solution segment. However, in the banking industry cloud-application solution field, Yusys Technologies has the top position. Yusys Technologies has also facilitated deep integration with its strategic shareholder Baidu to create an intelligent financial cloud. Thus, it has established a three-point approach to cooperation: improving the development of the financial cloud system, enhancing the financial cloud operation capability and expanding the financial cloud business.

During the first half of the year, two new customers launched and commenced trial operations of the financial ecosystem platform operated by Yusys Technologies together with its respective customers. Moreover, the company is comprehensively leveraging the value of the ecosystem, actively exploring diverse operating businesses, and comprehensively promoting customers' retail transformation. Using the innovative solutions business as a starting point, the company is also expanding business opportunities horizontally to continuously promote software development as a business.

The business of digital currency has also drawn attention from all avenues of the marketplace. Accordingly, Yusys Technologies signed a strategic cooperation agreement with Baidu and will apply its industry experience with Baidu's technical advantages in blockchain and other aspects to facilitate cooperation in the research and development of innovative products such as digital currency and its associated activities.

During the first half of the year, Yusys Technologies actively participated in the technology output and innovation transformation of CCB Fintech Co., Ltd. (hereinafter CCB Fintech), with the aim to make full use of their respective industry advantages and influence to create a comprehensive financial technology solution. Yusys Technologies will help CCB Fintech to form a business-development model driven by financial technology, enabling better integration of scenarios, technologies, data, and products. Thus, the two parties will work to develop fully dimensional cooperation. For example, the company will assist CCB Fintech and other small and medium-size banks in the creation of an ecosystem and provide customers with better technical support and other services.

From service to product upgrade: research and development consolidate internal strength

In its 21-year development history, Yusys Technologies has gradually evolved and now possesses both product and service genes. While services are at its core, products are its development path, and the two together are jointly driving business growth.

Since the first half of the year, Yusys Technologies has upgraded its products and released a total of 31 new products. For example, the next-generation data middle office product family system, which employs "micro-service + componentization," has been implemented in many banks, helping customers to operate and establish an independent and controllable financial data capability matrix, providing a solid foundation for digital transformation. A next-generation of distributed micro-service retail credit (Westar), based on an independent unified distributed development platform, is the industry's first micro-service version of the retail credit system, which has been launched successively in many urban commercial banks.

Yusys Technologies is actively developing an internal "unified technology base" project. In the independent research and development of a unified development platform, the broad implementation of a distributed mobile development platform and standardized technical specifications have significantly improved development efficiency and quality. Additionally, Yusys Technologies has established the first committee of technical experts to drive business development with technology, accelerated the introduction of viable new talents, built a team of high-level business experts, and improved capabilities with respect to products and solutions.

Yusys Technologies is certainly energetic in the development of its core business, but it's also making strategic investment, primarily in technology-driven and scenario-driven enterprises, to further improve the financial technology cooperation ecosystem.

Hong Weidong, the founder, chairman and CEO of Yusys Technologies, stated that during the second half of the year, the company will continue to strengthen its superior product line consulting, product, and comprehensive solution capabilities, and strengthen the model for cooperation based on financial cloud services, which is at the core of the company's future transformation. Yusys Technologies working hand in hand with customers and partners and walking together with them on this development journey.