Company Profile

Client Service International, Inc. is a China-based company principally engaged in the provision ofbanking related information technology (IT) solutions. The Company's primary businesses include theprovision of software product development and technical services to banks and other financialinstitutions, such as IT consulting, planning, construction, operation, product innovation andmarketing solutions, as well as other comprehensive solutions. The Company's main products includethe electronic banking systems, Internet financial systems, online banking security systems andbanking core business systems. The Company mainly operates its businesses in domestic market.

(Source: Reuters)

Investment Highlights

The banking-related IT solution provider has guided the Internet-oriented reform of banks for 20 years.

Client Service International (the company) is the leading enterprise engaged in the provision ofbanking-related Internet solutions in China. The company was established in 1999 and listed on theShenzhen Stock Exchange in 2017. It mainly provides online software products, electronic paymenttechnology services and a package of solutions based on IT for banks and other financial institutions.

In 2019, the company achieved a total revenue of CNY 934 million, a year-on-year increase of 23.98%;its net profit attributable to shareholders was CNY 49.51 million, with a year-on-year growth of16.28%.

The channel business pioneer takes advantage of the tide of Internet-oriented transformation ofbanking.

With bank businesses tending to be multiple and informatization and Internet trend of bankingbusiness continuously strengthening, the overall IT investment scale of China's banking industry isgrowing. In the market of banking-related IT solutions, the company have achieved full businesscoverage of channel, business and management, among which its market share in channel businessranks first. With the development of 5G network and the popularization of 5G market, banks willtransform to multi-channel Internet-based banking, and Client Service International, which specializesin Internet finance, will meet a new round of development opportunities.

Acquisition of high-end memory database helps the company to explore the huge market ofinformation technology innovation.

SUNJE SOFT is a Korean enterprise engaged in the development of memory distributed databaseproducts. Its products have breakthroughs in innovation and advantages in the field of highconcurrency and real-time transaction data processing. In December 2018, Client ServiceInternational completed the acquisition of SUNJE SOFT. From banking IT to operators, Client Service　　International is actively tapping the domestic market of information technology innovation through itsdatabase products.

Earnings forecast and investment recommendationWe estimate the company’s net profit to be CNY 86/171/337 mn for year 20/21/22, implying a P/Eratio of 121.5x/61.3x/31.1x (based on the closing price of July 10th, 2020). We give an “Outperform”

rating for the company.

Potential risks: smaller-than-expected investment scale of banking IT; intensifying market competition;poorer-than-expected promotion of GOLDILOCK