Changliang Technology 3Q23 performance is in line with our expectations.
The company announced 3Q23 results: 3Q23 operating income of 428 million yuan, year-on-year + 14.37%; return to the mother of 12 million yuan, from loss to profit; deduction of non-return net profit of 10 million yuan, year-on-year change from loss to profit. Q3 performance is in line with expectations.
Trend of development
Steady revenue growth, optimized order and cash flow performance. 3Q23's revenue was 428 million yuan, + 14.37% compared with the same period last year. The revenue growth mainly benefited from the gradual recovery of the pace of order acceptance and the expansion of overseas incremental markets. Orders and cash flow: 1) on the order side, 3Q23 label management platform broke through foreign bank customers for the first time, and Anhui Nongxin new generation Jinnong easy loan system project was successfully put into production. 2) on the cash flow side, the cash flow received by 3Q23 for selling goods and providing services is 417 million yuan, accounting for 97.31% of business income, month-on-month + 15.83ppt, and the cash flow trend is improving.
Improve efficiency and boost gross profit repair. 3Q23's gross profit margin is 30.33%, year-on-year + 3.19ppt, month-on-month-6.24ppt, and gross profit is improved compared with the same period last year, which means that the company gradually accumulates experience in large banks, improves delivery efficiency, superimposes a reduction in talent compensation, and slows down the pressure from the cost side; homing net profit rate is 2.70%, year-on-year + 2.91ppt, month-on-month + 3.63ppt, which is all warmer than the same period last year.
Equity incentive traction shows confidence in development, and directional additional issuance drives technology upgrading. The shareholders' meeting of the company approved the equity incentive plan in September 2023, which included stock option incentive and restricted stock incentive, which was awarded to 527 people. The equity incentive target is divided into two stages. Based on 2022, the growth rate of operating income or net profit of the company in 2023 is not less than 10%, and the growth rate of operating income or net profit in 2024 is not less than 20%, that is, the standard is met. We believe that the company's equity incentive covers a wide range and binds to the core backbone to demonstrate its confidence in development. The fixed increase project of the company was approved in October 2023, with a total of 573 million yuan to be raised. Through this fundraising, the company is expected to strengthen the construction of distributed core technology architecture platform and enhance big data's product richness and business strength.
Profit forecast and valuation
We keep our profit forecasts basically unchanged in 2023 and 2024 and maintain our outperforming industry rating. Taking into account the downside of the valuation hub of the industry, the target price was lowered by 14.3% to 12 yuan, corresponding to 44.3 times 2024 Pamp E, which has 28.9% upside compared to the current share price, which corresponds to 34.3 times 2024 Pmax E.
Risk
The promotion of overseas business is not as expected, and the distributed transformation of the core system is not as expected.