Event: according to the third quarterly report of 2023 released by Hyde shares, the company's 23Q1~3 realized revenue of 950 million yuan, an increase of 20.78% over the same period last year, and a net profit of 769 million yuan, an increase of 41.56% over the same period last year.

The company's performance maintained high growth, non-recurrent profit and loss increased significantly: 2023Q1~3, Hyde shares seized the market opportunity to actively enter the new blue ocean of bad individual loans while digging into the troubled asset management business of institutions. The company's revenue was + 20.78% to 950 million yuan compared with the same period last year, and its net profit was + 41.56% to 769 million yuan, deducting the non-parent net profit from + 7.88% to 582 million yuan. The weighted average ROE reached 14.38%, an increase of 3.32% over the same period last year. There is a large gap between the non-return net profit growth and the return net profit, which is mainly due to the increase in the fair value of 23Q1~3 investment real estate, which drives the company's non-recurrent profit and loss from 260000 yuan of 22Q1~3 to 187 million yuan.

The pace of non-performing individual loan development industry accelerated, and structural adjustment and extension mergers and acquisitions were carried out at the same time: 23H1 disclosed the performance of individual loan bad business for the first time, of which the entrusted asset management business realized 56.47 million yuan in service fee income. In the third quarter, the company further accelerated the layout of non-performing assets in individual loans. 1) the newly established Ministry of Digital Science and Technology, on August 3, 2023, Hyde AG announced that it planned to establish the Ministry of Digital Science and Technology according to the company's strategic layout and business development needs. In the context of the company's non-performing loan business continues to grow, this move is expected to continue to consolidate the company's "big data + AI technology" core advantages, but also facilitate the docking of the central bank credit information system. 2) holding the established electric enterprises and enriching the bad disposal methods of individual loans. On October 9, 2023, Hyde shares announced that it had achieved control over Guangzhou Huilong, a veteran collection company, through equity transfer and capital increase, with a total holding ratio of 51%. Through this transaction, Hyde is expected to make full use of Guangzhou Huilong business channel resources to increase the scale of its entrusted service business, and combine its endowment to form a diversified, full-chain and efficient intelligent disposal platform such as "AI+ judicial, telephone, mediation".

The scale of institutional business income is expected to remain stable: 2023H1's non-performing assets disposal business income of 489 million yuan, + 2.12% year-on-year, accounting for 89% of revenue. As of 2023H1, the balance of Hyde's energy / commercial real estate / listed company distressed assets project is 49.7% 11.2 / 710 million yuan respectively, accounting for 65% of the company's stock investment balance, 15% and 9% respectively. 2023Q1~3 's revenue continues to grow, and it is expected that the revenue from the institutional distressed asset management business will increase steadily.

Profit forecast and investment rating: based on the company's operating performance in the first three quarters, we slightly revised up the previous profit forecast. It is estimated that the company's net profit from 2023 to 2025 is 11.3715.72 / 2.09 billion yuan respectively (the original value is 11.36shock 15.71pm 20.88 billion yuan), with a corresponding growth rate of 62.45%, 38.24% and 32.94%, respectively. The corresponding EPS from 2023 to 2025 is 0.84, 1.17 and 1.55 yuan respectively, and the current market capitalization is 14.46, 10.46 and 7.87 times of the PE from 2023 to 2025, respectively. We are optimistic that the company will rely on the first-mover advantage of individual loan non-performing business to open up the growth space and maintain the "buy" rating.

Risk tips: 1) the non-performing business development of individual loans is not as expected; 2) strict supervision restrains industry innovation.