Hundsun(SH:600570)2025-09-15 13:17Summary of Hundsun (600570.SS) Post-Result Group Call Company Overview - Company: Hundsun Technology Co., Ltd. (600570.SS) - Industry: B2B Software, specifically focused on financial technology solutions Key Takeaways 1. Improvement in Client IT Budgets: Management noted an improvement in client IT budget execution rates since September 2024 for previous-year budgets and July 2025 for current-year budgets, although a time lag exists before this translates into recognized revenue [1][9] 2. Acceleration of Xinchuang Projects: Expected acceleration in contract signings and live deployments of next-generation core systems (UF3.0 and O45) over the next 1-2 years, driven by improved capital markets and regulatory pushes [1][9] 3. Gross Margin Improvement: Anticipated improvement in gross margin due to the maturity of new products and enhanced project implementation capabilities [1][9] 4. Hong Kong Subsidiary Success: Hundsun Ayers has successfully delivered a virtual asset trading system for Guotai Junan International, positioning itself to serve other Chinese financial institutions in Hong Kong's regulated virtual asset market [1][11] 5. Shareholder Return Policy: The company aims to maintain a total shareholder return ratio of approximately 30% [1][17] Financial Performance Highlights 1. Revenue Decline: Revenue decreased by 14.4% YoY in 1H25, attributed to macroeconomic headwinds, competitive pressures, and strategic realignment [5][6] 2. Cost Discipline: Total operating costs fell by 13.8% YoY, with significant reductions in selling expenses (-26% YoY) and G&A expenses (-21% YoY) [5][6] 3. Net Profit Surge: Attributable net profit increased by 772% YoY, largely due to a low base effect from 1H24, with net profit excluding non-recurring items up by 42% YoY [6][9] Business Line Performance 1. Retail IT Revenue: Declined modestly by 3.1% YoY, benefiting from a stock market rebound post-September 2024 [9][10] 2. Asset Management IT Revenue: Contracted sharply by 32.4% YoY due to revenue pressures from industry-wide fee reductions and a transition to the O45 platform [10] 3. Operational and Institutional IT Revenue: Down 7.2% YoY, but supported by policy tailwinds [12] 4. Data Services Growth: Gildata subsidiary recorded 2.1% YoY revenue growth, benefiting from AI adoption [12] Next-Generation Product Progress 1. UF 3.0: Live at multiple brokers with over 10 clients signed and more in negotiation [12] 2. O45: 120 clients signed contracts, with 70 in the trust and banking sectors already live [12] 3. Hundsun Ayers: Covers approximately 250 of the 500 brokers in Hong Kong, generating significant revenue with a subscription-based model [12] Strategic Focus and Market Dynamics 1. Shift in Strategy: Management is focusing on quality of revenue rather than top-line scale, emphasizing net profit and cash flow [9][17] 2. Competitive Landscape: The company expects a stable competitive environment, with potential market consolidation benefiting established players like Hundsun [9][17] 3. Impact of Brokerage M&A: Short-term consolidation may reduce client firms but create opportunities for system integration projects [17] Valuation and Risks - Price Target: Buy rating with a 12-month price target of Rmb 38.99, representing a 13.1% upside from the current price [15] - Downside Risks: Include potential shortfalls in capital market recovery, client IT spending, and gross profit margin declines [15][17]