Event: On April 25, the company released its report for the first quarter of 2023. The company's 2023Q1 revenue was 172 million yuan (YoY +9.66%), net profit of 16 million yuan (YoY +55.70%), and the performance was in line with expectations.

Performance is growing steadily, and gross margin continues to rise. With the steady progress of social security cards and the company's various businesses, the company's 2023Q1 revenue rose steadily. At the same time, due to the company's scale effect and the increase in the share of high-margin software products, the company's comprehensive gross margin for 2021/Q1 was 48.97%, an increase of 5.76pct over the previous year.

Social security cards have entered the peak issuance period to guarantee a basis for annual performance growth. In recent years, the country has vigorously promoted the establishment of a one-card service management model using social security cards as the carrier, and promoted the release of three generations of social security cards. By the end of 2022, the number of social security card holders nationwide reached 1,368 million, with a penetration rate of 96.8%. Among them, the number of third-generation social security card holders reached 267 million, and there is still room for penetration by nearly 1.1 billion people. Among them, in 2022, the company issued about 36 million cards throughout the year, and sales revenue increased nearly 64% year-on-year. In the short term, the replacement of second-generation and first-generation social security cards with third-generation social security cards will lay a solid foundation for the company's performance growth over the next year or two.

A complete closed loop of “data accumulation,” “data development,” and “data operation” has been formed based on the application of various scenarios of the One Card, combined with various livelihood data applications such as employment services and identity verification. Currently, the “1+6+N” service model is built using big data, artificial intelligence, and the Internet of Things as a technical foundation. Through the “1” resident service card application platform, “N” application services are provided for the “6” major industry scenarios of government enterprises, cultural tourism, communities, campuses, construction sites, and medical care, integrating data perception, decisions, applications, etc. into urban management and governance, providing management means and data support for government decisions and enterprise operations, and achieving “full visibility, full management, and full control” of scene data, and promoting “full connectivity, full integration, and full openness” of scene data. At present, the company's one-card business has covered 150+ cities across the country. Based on various scenarios and applications of the one-card card, combined with various livelihood data applications such as employment services and identity verification, it has formed a complete closed loop of “data accumulation,” “data development,” and “data operation.” Big data is deeply integrated with the field of people's livelihood services. The company's series of products and services have been promoted at an accelerated pace throughout the country, and application results are becoming more and more remarkable.

Profit forecast and investment advice: It is predicted that the company's 2023-2025 operating income will be 1,433, 18.85, and 2.287 billion yuan, net profit of RMB 2,00, 2.71 million and 334 million yuan, and EPS will be 0.65, 0.88, and 1.08 yuan/share, maintaining the “increase in holdings” rating.

Risk warning: The progress of issuing social security cards fell short of expectations, and the expansion of the data business fell short of expectations