Incidents:

During the reporting period, the company achieved total operating income of 905,375,800 yuan and net profit attributable to shareholders of listed companies of 113,7562 million yuan, up 21.91% and 24.26% respectively over the previous year.

The company's performance is basically in line with expectations

The company's performance met expectations mainly due to the industry growth opportunities brought about by the upgrade of social security cards to “one-card”. The company continuously improved the “service to drive card issuance” business model in the “one-card” field of resident services, effectively implemented the active card issuing model in many cities. The company issued about 36 million cards throughout the year, sales revenue increased nearly 64% year-on-year, and the company's third-generation card market share has always maintained a leading position in the industry. At the same time, the company has helped many cities start building digital scenarios, expanding the application of the “One Card” for residents' services in scenarios such as transportation, medical care, social security, government affairs, epidemic prevention and control, etc., and continuously promoted the horizontal expansion and deepening of scenario applications to achieve diversification of the “One Card” application scenarios for residents' services.

The social operations and big data business is expected to open up the second growth curve. The company “Human Resources Operation and Big Data Service” will achieve a sustainable breakthrough. The revenue from this business reached 165.182,400 yuan, an increase of 149.12% over the previous year, reflecting the company's leading advantage in the field of digital livelihood services.

Judging from the contract amount, throughout 2022, the amount of new contracts signed by the company's main operating contracts increased by more than 30% over the same period last year. We believe that the company's three businesses: (1) human resources operation services based on big data, (2) C-side intelligent customer service, and (3) social security financial services, will continue to innovate and help the company open up a second growth curve.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue for 2023-25 to be 1,38/19.01/2,472 yuan, respectively, with a corresponding growth rate of 50%/40%/30% respectively, and the net profit of the mother returned to the mother is 17/217/280 million yuan respectively. The corresponding growth rate is 49.37%/27.93%/28.82% respectively, EPS is 0.55/0.70/0.91 yuan respectively, and the 3-year CAGR is 38.72%.

Since the company, as a leading company in the social security field, is in the rapid stage of exchanging third-generation social security cards, we gave the company 48 times PE in 23 years, with a target price of 26.4 yuan, maintaining the rating for increasing holdings.

Risk warning: policy progress falls short of expectations; market competition intensifies; risk of hypothetical bias.