The first half of 2026 proved to be another prosperous period for the securities industry. From the perspective of the parent company caliber within the sector, securities firms saw their operating revenue climb 32% year-on-year, with net profits rising by 23%. As upstream suppliers to the brokerage sector, securities IT vendors experienced sharply divergent performances in the January-June period of 2026: Hithink RoyalFlush Information Network Co., Ltd. recorded the highest revenue and net profit among its peers; Wealth Trend had the lowest revenue, while YSSTECH posted the weakest net profit. Notably, Hithink's net profit for the first half stood at 2.87 times the combined net profits of the other six securities IT companies.

When examining growth metrics, Hithink led the pack in revenue expansion during the first half, whereas Hundsun Technologies Inc. suffered the steepest revenue contraction. Shenzhen Kingdom Sci-Tech Co., Ltd. managed to swing back to profitability, achieving the highest profit growth rate, while DZH Limited experienced the most significant net profit decline.

Kingdom's Deducted Non-Recurring Net Profit Still in the Red

According to a research report from Soochow Securities, brokerage IT can be divided into two main sub-sectors: C-end brokerage IT (market data and trading software for individual investors, along with value-added services) and B-end brokerage IT (trading systems and core business systems tailored for brokers and asset management institutions). Companies in the C-end segment typically offer market data and trading software, system maintenance, technical analysis systems, and software products for securities trading systems, with representative players including Hithink, Wealth Trend (Tongdaxin), and DZH. On the other hand, B-end financial IT providers focus on delivering complex core business software such as centralized trading systems, asset management trading systems, high-speed trading platforms, and data middle offices to brokerage firms and asset managers, exemplified by Hundsun Technologies Inc., Shenzhen Kingdom Sci-Tech Co., Ltd., Apexsoft, Wealth Trend, and YSSTECH.

Kingdom's First-Half Fundamentals Reveal Underlying Strain

The interim report shows that Shenzhen Kingdom Sci-Tech Co., Ltd. remains deeply committed to its core financial technology business, reinforcing its foundational focus on wealth technology and investment technology. Its primary business model follows a "software plus services" approach, delivering products and solutions to clients while also providing operational, maintenance, consulting, and customized services. During the first half of 2026, the company generated operating revenue of 1.130 billion yuan, down 6.43% year-on-year. Net profit attributable to shareholders reached 13 million yuan, a turnaround from the 39 million yuan loss recorded in the same period last year. On the surface, the company appears to have emerged from its loss-making phase; however, net profit after deducting non-recurring gains and losses still posted a deficit of 24 million yuan.

The revenue decline is not a new phenomenon for Kingdom, as its full-year 2025 revenue stood at just 2.419 billion yuan, representing a massive 48.46% year-on-year drop—nearly halving the top line. This marked the fourth consecutive year of contraction, with revenue shrinking by over 60% from its 2021 peak of 6.646 billion yuan.

Severe Divergence Between Operating Cash Flow and Net Profit

By the end of the first half of 2026, Kingdom's accounts receivable had surged to 700 million yuan from 311 million yuan at the same point in 2025, an increase of 124.61%, even as revenue declined by 6.43% during the period. This means the growth rate of receivables was nearly 20 times the absolute value of the revenue growth rate—a highly unusual signal. When compared to the end of 2025, where receivables stood at 244 million yuan, the jump to 700 million yuan by mid-2026 represents a 186% surge, far outpacing the -6.43% revenue growth. From a financial perspective, when receivables growth significantly outpaces revenue growth, it suggests slower collections, prompting investors to scrutinize whether the company has relaxed its credit policies or faces risks of premature revenue recognition or revenue inflation. Kingdom attributed the sharp rise in receivables to revenue recognized during the period that has not yet reached its collection date.

In addition, the company's net cash flow from operating activities for the first half of 2026 stood at -1.039 billion yuan, an extreme divergence from the 13 million yuan net profit recorded for the same period. Even when compared to the deducted non-recurring net loss, the gap remains stark. More concerning is the fact that this -1.039 billion yuan figure represents a nearly 24-fold deterioration from the -43.48 million yuan recorded in the same period last year. Moreover, this operating cash flow reading was the lowest among the seven listed securities IT companies. Kingdom explained that the reduction in operating cash flow was mainly due to increased cash payments for goods purchased and higher employee compensation during the period. However, given that the company's revenue only fell by 6%, attributable net profit turned positive, and deducted non-recurring losses narrowed, such a substantial outflow in operating cash flow warrants close investor attention regarding the quality of earnings.

R&D Investment Cut Raises Concerns

During the first half of 2026, Kingdom's research and development expenses came in at 231 million yuan, down 5.18% year-on-year. Total R&D investment (including capitalized amounts) reached 239 million yuan, a decline of roughly 3.6% from the prior year. Breaking down the R&D expense items, reductions in R&D personnel compensation and service fees were the primary drivers behind the decrease. Industry analysts maintain that heavy R&D investment serves as a critical moat for securities IT service providers. R&D spending is not a flexible cost item that can be easily adjusted; rather, it is a strategic investment essential for sustaining core competitiveness. With AI large language models reshaping the financial IT landscape and numerous securities IT vendors announcing AI-driven strategies, a contraction in R&D could hamper the pace and depth of AI product commercialization. While cutting R&D expenses directly can bolster short-term profits, excessive compression—especially significant reductions in R&D headcount—could dampen core team morale.

Founding Shareholder Trims Stake Amid Regulatory Attention

In the first half of 2026, Zhao Jian, the third-largest shareholder, co-founder, director, and honorary chairman of Shenzhen Kingdom Sci-Tech Co., Ltd., unveiled a share reduction plan. Citing "personal funding needs," Zhao initiated a plan to sell up to 15.4 million shares (no more than 1.64% of total share capital) through centralized bidding and block trades within three months starting May 6, 2026. Ultimately, Zhao disposed of 1.1175 million shares, representing 0.12% of the total share capital. While the reduction ratio was relatively modest and posed limited market impact, the selling activity by core shareholders still merits attention. In fact, the market had already taken notice of selling by founding shareholders such as Zhao late last year. As of early November 2025, founding veteran Xu Minbo had sold 1 million shares, cashing out approximately 22.22 million yuan, and promptly resigned from his director position following the reduction. Meanwhile, Zhao Jian had cumulatively sold 9.2349 million shares, realizing around 156 million yuan in proceeds.