Event: on the evening of October 23, China University of Science and Technology released its third-quarter report of 2023, with revenue of 1.775 billion yuan in the first three quarters, an increase of 32% over the same period last year, a net profit of 65 million yuan, an increase of 18% over the same period last year, and a deduction of 15 million yuan in non-net profit, down 27% from the same period last year.

The revenue side maintained growth against the trend, and Q3 deducted non-profit increased by 194%. Judging from the single quarter, the revenue of 23Q3 of HKUST reached 658 million yuan, an increase of 24% over the same period last year, still maintaining a good growth trend in the first half of the year; the net profit of 23Q3 in the single quarter was 18 million yuan, compared with-8 million yuan in the same period last year; in terms of deducting non-profit, the company Q3 reached 12 million yuan, an increase of 194% over the same period last year. Keguochuang has maintained a good growth trend in this year's relatively complex environment, which is enough to show the strong growth momentum brought about by the joint drive of the company's three major businesses.

The software business has developed steadily, and digital operating revenue has increased by 222%. From the perspective of business: 1) the operating income of the digital application business reached 780 million yuan in the first three quarters, an increase of 11.9% over the same period last year, mainly due to the good recovery momentum of the business in the current period and steady growth in operating income. 2) the operating income of the digital product business reached 157 million yuan in the first three quarters, down 59.6% from the same period last year. This is mainly due to the fact that the company's intelligent BMS product business has not developed as expected since the beginning of this year due to the intensification of market competition in the new energy vehicle industry and the company's product upgrade cycle. Since the third quarter, the business has gradually recovered, but there is still a gap compared with the same period last year. 3) the operating income of the digital operation business in the first three quarters was 840 million yuan, an increase of 222.45% over the same period last year, and the operating performance also maintained a rapid growth over the same period last year. The growth rate of the business is faster than the main coefficient, the number of users of ETC business continues to increase and the ability of value operation continues to improve.

Cost control is good, performance continues to release. Judging from the company's cost input, the company's sales / management / R & D expenses in the first three quarters were RMB 1.11 million respectively, with a year-on-year growth rate of 2%, 1% and 3% respectively, which is much lower than the company's revenue growth rate. The company continues to control the cost input, and the profit end is expected to continue to release.

It is proposed to increase investment by 810 million yuan and increase the layout in the field of AI and energy storage. The company recently released a fixed increase plan, which intends to invest 980 million yuan (including 810 million yuan) for the construction of data intelligent platform, energy storage BMS and other projects. Focusing on core technologies such as natural language processing, knowledge graph, rule calculation, data asset management, etc., the company has developed and upgraded data intelligent platforms (including data exchange platform, AI platform, etc.); for application scenarios such as operators, energy, transportation, government and enterprises, etc. In the field of energy storage, the company plans to build the production assembly line of core components such as energy storage BMS/BEMS and the assembly test line of centralized / distributed energy storage system, so as to form the annual production capacity of 0.96GWh energy storage system and energy storage core components. Investment advice: taking into account the uncertainty of the recovery of downstream demand since 2023 and the competition encountered in the company's BMS business, we have lowered the company's profit forecast. It is estimated that the company's net profit for 2023-2025 will be 1.08,1.56 and 201 million yuan respectively, with year-on-year growth rates of 286%, 45% and 29% respectively. The current market capitalization corresponds to a PE of 44-31-24 times in 2023-2025. Considering the company's continued investment in emerging areas such as AI, BMS and energy storage, the company's performance is expected to maintain rapid growth and maintain a "recommended" rating.

Risk hint: the landing progress of fixed increase is not as expected; the expenditure of downstream customers is not as expected; the landing of AI technology application is not as expected.