Event: according to the company's quarterly report for 2023, 2023Q3 achieved 399 million yuan in revenue in a single quarter, an increase of 30.21% over the same period last year, and realized a net profit of 254 million yuan, an increase of 15.28% over the same period last year. 2023Q1lyQ3 achieved an income 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% + 3.32pct to 14.38%. The performance is in line with expectations.

Institutional bad business: steady development based on shareholders' industrial background and their own advantages. The company's institutional bad business mainly focuses on energy, commercial real estate and listed companies, which is the main source of the company's performance.

The non-performing business income of 2023H1 institutions is 489 million yuan, accounting for 88.88% of revenue. It is estimated that 2023Q3's revenue growth is still mainly contributed by institutional bad business. At the same time, the 2023Q1-Q3 fair value change income from + 1817% to 192 million yuan compared with the same period last year, mainly due to the increase in the fair value of commercial real estate in the bad business of institutions.

Non-performing business of individual loan: buy the electric company and realize the double mode layout of "legal lawsuit + telephone" settlement.

On October 9, 2023, the company announced that Guangzhou Huilong Enterprise Management Consulting Co., Ltd. (hereinafter referred to as "Guangzhou Huilong"), Guangzhou Huilong has a certain market competitive advantage in telephone disposal. 1) previously, the bad business of individual loan of the company was mainly based on the mode of "legal action and clear collection". The company was approved to carry out personal non-performing loan acquisition and disposal business nationwide in July 2021, and acquired Junfeng Technology with the whole process system of individual loan non-performing batch lawsuit in August 2022. Junfeng Technology mainly deals with the problem of "large number of debtors + small amount of individual loan" in the way of "big data + AI". It adopts the scheme of "science and technology + judicature" to dispose of individual loan non-performing assets, and its comprehensive strength occupies a leading position in the field of judicial disposal of individual loans. 2) acquire Guangzhou Huilong, supplement the "telephone settlement" model, and open up the fiduciary service business channels of large banks and other financial institutions. Guangzhou Huilong began to provide non-performing loan collection and disposal services for banks and other financial institutions in 2008, with complete business qualifications to meet the qualifications of shortlisted service providers of large banks and other financial institutions. Guangzhou Huilong's shortlisted financial institutions include six major state-owned banks, most of the national joint-stock banks, large city commercial banks and consumer finance companies, as well as some insurance companies. In 2022, the management scale of entrusted disposal service has exceeded 80 billion yuan, and there are sufficient orders on hand. 3) in the future, it is expected that Junfeng Technology and Guangzhou Huilong will develop together to form a diversified and full-chain intelligent disposal platform such as "AI+ Judicature, telephone, Mediation".

Investment advice: bad business of institutions lays the foundation for performance, and there is a broad space for bad business of individual loans. We estimate that the company's operating income in 2023, 2024 and 2025 will be 14.75,34.91 and 6.868 billion yuan respectively, with year-on-year growth rates of 38.7%, 136.7% and 96.7% respectively, and net profit of 10.15,14.25 and 2.188 billion yuan respectively, with year-on-year growth rates of 45.0%, 40.3% and 53.6% respectively. The PE of the company's current stock price in 2023, 2024 and 2025 is 15.65,11.15x and 7.26x respectively. Maintain the "overweight" rating.

Risk hint: the development of non-performing individual loan business is not as expected; the competition in the industry is intensified; and the supervision policy is stricter.