Incident: The company released its 2022 annual report and the report for the first quarter of 2023. Operating revenue for the full year of 2022 was 3.22 billion yuan, a decrease of 8.2% over the previous year, and net profit of the mother was -290 million yuan, a decrease of 518.7% over the previous year. In Q1 of 2023, operating income was 660 million yuan, a decrease of 18.8% over the previous year, and net profit returned to the mother was 429.93 million yuan, a decrease of 421.3% over the previous year.

Performance was under pressure in the short term, and the focus was on promoting commercialization projects in '23. Affected by macro-factors, the bidding, implementation, delivery, and acceptance of some of the company's projects have all slowed down, dragging down the overall revenue recognition progress. At the same time, the company's personnel costs and project procurement costs are relatively rigid, and profit levels have been greatly impacted. We believe that the most difficult time for the company may be over, and related business expansion is expected to return to a positive growth trajectory; the company will focus on promoting the commercialization process in 2023, combining years of industry experience and technical capabilities to build a smart city operating system to enhance profitability through commercialization and modularization. With the arrival of the company's fixed capital increase, short-term loans at the end of Q1 2023 decreased by 620 million yuan compared to the end of 2022, and the liquidity ratio increased to 1.19. The capital structure improved markedly. Financial expenses are expected to decline throughout the year. It is expected that growth will accelerate in line with the arrival of an inflection point in the industry's recovery.

China Life is deeply empowered, and synergies are expected to be strengthened. Since China Life became the largest shareholder of Wanda Information in 2019, Wanda Information has positioned Wanda Information as an important bearer of the “Technology China Life Insurance” strategy and carried out a series of strategic adjustments and upgrades. Previously, China Life Insurance participated again as the highest share of the company's fixed increase project, and its shareholding ratio increased to 20.32%. We believe that this increase in holdings shows China Life Insurance's long-term optimism about the company's development prospects, and is also conducive to deeper business collaboration between the two sides in the health industry.

Explore data elements to authorize operations and take a solid step forward in data monetization. With the introduction of the “Twenty Data Rules” and the establishment of the National Data Administration, the top-level planning for data elements has been basically clear. Currently, local laws and regulations have been introduced one after another, data groups have been established one after another, and the data element market construction process has clearly accelerated. The company actively participated in the exploration of authorized operation of public data, jointly invested with Ningshui Health Big Data Operation Co., Ltd. to establish Ningtang Health Big Data Technology Co., Ltd. and participated deeply in the pilot work of the healthcare big data service operation business. We believe that with the continuous promotion of relevant policies and the further improvement of laws and regulations, the company is expected to benefit deeply from the development of data element markets such as health insurance and medical care.

Profit forecasts and investment recommendations. The company's EPS is expected to be 0.04 yuan, 0.19 yuan, and 0.31 yuan respectively in 2023-2025. We are optimistic that the synergies between the company and China Life will further deepen. We suggest actively monitoring the company's progress in the field of data element operation and subsequent profit elasticity performance to maintain the “hold” rating.

Risk warning: Risks such as policy implementation falling short of expectations, synergies between the company and China Life Insurance falling short of expectations, and increased market competition.