ERP implementation of service providers successfully transformed enterprises into digital integrated service providers. Since its establishment in 2002, the company has been focused on providing enterprise customers with information and digital construction services. In the early stage, the main business of the company is the implementation consulting of mature international management suite (mainly ERP), which mainly serves the fast-growing and top-ranked corporate customers in various industries and professional fields. With the continuous expansion and upgrading of the digital needs of the company's customer base, the company has changed from a simple ERP implementation service provider to a digital integrated service provider more in line with the needs of the large enterprise market. At present, the company has formed four major business lines: industrial digitization, financial digitization, pan-ERP and ITO, mainly for large enterprises, providing digital software, solutions and consulting implementation services.

Traditional business remains stable, while emerging business is developing rapidly. The company issued a performance forecast on January 30. In 2022, the company expects to achieve a net profit of 441-471 million yuan, an increase of 123.78% and 139.01% over the same period last year, deducting a non-return net profit of 0.70-100 million yuan, an increase of 143.31% and 161.87% over the same period last year. In the first three quarters of 2022, the company achieved revenue of 2.23 billion yuan, an increase of 9.11% over the same period last year, deducting non-return net profit of 81 million yuan, an increase of 200.93% over the same period last year. In terms of main business, the company's emerging business (industrial digitization + financial digitization) maintained rapid growth. In the first three quarters of 2022, the revenue of industrial digitization reached 547 million yuan, an increase of 38.62% over the same period last year, accounting for 24.51% of total revenue; financial digitization of 516 million yuan, up 22.59%, accounting for 23.14% of total revenue; Pan-ERP7.86 billion yuan, down 6.55%, accounting for 35.26% of total revenue IT outsourced 366 million yuan, down 0.05%, accounting for 16.42% of total revenue. In the first three quarters, the company's emerging business revenue increased by 30.34% compared with the same period in 2021, and the proportion of total business also increased to 47.65% from 39.88% in the same period in 2021, maintaining its position as the main driver of growth. Among them, the industry digital business has achieved a relatively outstanding growth rate, thanks to the company's focus on the development of the new energy industry in recent years, and seized the industry opportunities in 2022, and smart manufacturing and supply chain business orders have increased significantly. We believe that the company's emerging business based on industrial digitization and financial digitization has gradually matured and begun to make efforts, and is expected to become the company's main growth point in the next two or three years.

Emerging business led to an increase in overall gross profit margin. In terms of gross profit margin, the gross profit margin of the company's main business continued to rise, with a gross profit margin of 30.01% in the first three quarters, an increase of 3.77 percentage points compared with 26.24% in the same period in 2021.

In terms of sub-business, the gross profit margins of industrial digitization, financial digitization, pan-ERP and IT outsourcing are 35.18%, 29.58%, 33.31% and 16.44%, respectively. Traditional pan-ERP services and IT outsourcing services remained stable compared with the same period last year, and the overall gross profit margin was mainly driven by emerging businesses. Thanks to the continuous improvement of the maturity of independent software products and the continuous optimization of implementation methods, the gross profit margin of industrial digitization and financial digitization business increased by 9.79 and 4.83 percentage points respectively compared with the same period. We believe that with the gradual maturity of industrial digital and financial digital products and the increasing proportion of revenue, the company's overall gross profit margin is expected to further increase.

The development prospect of core business intelligent manufacturing is broad. The company's industrial digital business mainly focuses on the enterprise's production, supply and marketing system, which aims to comprehensively improve the market-oriented customer order, efficient delivery and industrial chain coordination through the digital transformation and evolution of the business. Industrial digital business mainly includes three major businesses: intelligent manufacturing, digital marketing and Zhi Association supply chain. We believe that intelligent manufacturing is the most core and promising business in the digitization of the industry. The company's intelligent manufacturing business has a competitive advantage in the market, on the one hand, the deep ploughing manufacturing industry has formed a solution of horizontal integration (from customers to suppliers) supply chain coordination and vertical integration (from R & D to manufacturing) research and production coordination for many years, realizing "end-to-end" capacity coverage, which can help large and medium-sized enterprises to build a complete digital manufacturing operation system. At the same time, the company pays attention to the application integration of new technologies, supplemented by intelligent technologies such as big data and AI, deeply studies the innovative technologies and applications of IT/OT integration, realizes the connection of internal physical equipment, completes the connectivity of internal software, and can provide rich application scenarios to create an intelligent factory with full process and multi-system integration. On the other hand, it mainly focuses on the development of lithium new energy, complete vehicles and auto parts, construction machinery, home furnishings and other areas. In 2022, the company's business in the field of power and energy storage batteries continues to grow at a high speed. Relying on its head customers, the company's service capacity extends to the upstream and downstream of the new energy industry. We believe that relying on the high prosperity of new energy and other industries, there is a broad space for intelligent manufacturing business.

Other emerging business products are gradually maturing. In addition to intelligent manufacturing, digital marketing is also an important subdivision of industry digitization. At the marketing end, the company revolves around the main customer groups, with independent series of marketing digital software and supporting services, with high order efficiency, high order delivery speed, high cost output efficiency, high repurchase rate and so on as the core goals. help brand enterprises to build a high market competitiveness digital marketing system in line with their own characteristics, digital marketing typical customers are Tsing Tao Beer, Guangming Dairy, Cofco Wine and so on. In the aspect of financial digitization, it is considered that the large enterprises, as the main customers of the company, generally have the demand of fine financial management under the organizational structure of the group.

Based on the independent series of financial software products, the company provides a comprehensive financial digital system for enterprise customers. The ability combination of application software + big data + AI helps enterprises to establish a comprehensive digital financial management and control + digital financial operation + digital financial sharing capability system, which aims to reduce the cost of internal communication and cooperation, improve business efficiency, optimize the connection system of industry and property, realize the automation of settlement and accounting, standardize the process of industry and property, integrate industry and property, and help enterprises to realize the integration and sharing of industry and financial resources. At present, the company has launched a number of independent products, such as intelligent financial suite, clearing and settlement software, Yinuo intelligent contract cloud and so on.

Profit forecast and investment advice.

(1) Industrial digitization: we believe that industrial digitization is the core business of the company's transformation, benefiting from the high prosperity in areas such as intelligent manufacturing and new energy. We expect that the company's industrial digital business, mainly based on "intelligent manufacturing" and "digital marketing", will achieve rapid growth, with revenue growth of 40%, 52% and 53% respectively from 2022 to 2024. With the gradual maturity of proprietary software products and the improvement of delivery efficiency, we expect the gross profit margin of industrial digital business to be 35.0%, 40.0% and 42.0% respectively from 2022 to 2024.

(2) Financial digitization: we believe that the customer base represented by the fast consumer industry leader has a high demand for "industry-financial integration" and a strong willingness to replace it with domestic production. we expect the company's financial digitization to maintain rapid growth, with income growth of 15%, 35% and 40% respectively from 2022 to 2024. With the gradual maturity of proprietary software products and the improvement of delivery efficiency, we expect the gross profit margin of the financial digital business to be 30.0%, 35.0%, 35.0%, 37.5%, respectively, from 2022 to 2024.

(3) Pan-ERP: we believe that pan-ERP is the company's traditional core business. Considering the impact factors of new incremental space, such as demand recovery after the epidemic, Chinese enterprises going to sea, we expect pan-ERP business to maintain steady growth, with revenue growth of 8%, 18% and 18% respectively from 2022 to 2024.

(4) IT outsourcing: we believe that with the recovery of downstream demand after the epidemic and the increased demand for software development services from enterprise digitization, we expect the IT outsourcing business to maintain steady growth, with revenue growth of 6%, 15% and 15% respectively from 2022 to 2024.

We forecast that the return net profit of the company from 2022 to 2024 is RMB 4.52 million, respectively, and the corresponding EPS is 0.52, 0.31 and 0.47 respectively. The company is given a dynamic PE44-51 times in 2023 and a six-month reasonable value range of 13.82-16.01 yuan, covering for the first time and giving it a "better than the market" rating.

Risk hint. The growth rate of product and intelligent manufacturing business is lower than the expected policy change, the concentration of major customers is high, the development of new business for new customers is disadvantageous, and the market competition is intensified.