Event: according to the company's report for the third quarter of 2023, the company achieved 2.89 billion yuan in operating income in the first three quarters, down 12.0% from the same period last year, 550 million yuan in net profit, up 80.4% over the same period last year, and 930 million yuan in operating income in the third quarter alone, down 19.9% from the same period last year. The net profit reached 220 million yuan, up 96.8% from the same period last year.

During the period of industry adjustment, the receiving order flow declined in a short period of time. The company's revenue declined in the third quarter compared with the same period last year, and we judged that it was mainly affected by the adjustment of its own risk control compliance strategy, as a result of the decline in the volume of transactions handled by the receipt business. With the gradual clarity of the industry regulatory policy, the industry pattern is expected to usher in further clearance, the company will follow up or re-adjust the business expansion strategy, and it is expected that the receipt business and revenue will return to growth in 2024.

Gross profit margin continued to rise, leading to a high profit margin. In 2023, the company's Q3 gross profit margin reached 39.8%, an increase in 15.62pp compared with the same period last year, and a month-on-month increase in 3.31pp, among which: 1) the overall fee rate of the receiving industry increased, the channel cost expenditure paid by the superimposed subsidiary Jialian decreased, and the subsidy input decreased; 2) the company continued to vigorously expand the overseas electronic payment equipment business with high gross margin. Under the substantial optimization of the gross profit structure of "receipt + terminal", the company's profits have achieved rapid growth.

Overseas layout space opens, AIGC creates additional growth momentum. The company's AI business has made initial achievements in technology research and development and commercial operation. The functions of Picso, Face Magic and other tool products launched for overseas markets continue to iterate, and downloads continue to rise. In addition, in order to promote the long-term development of AI business and achieve effective incentives to the AI business founding team, the company and the AI business founding team set up an overseas platform company Duality Intelligence Limited, which holds a 35% stake and generates an investment income of more than 10 million in the third quarter alone. In the future, the company will continue to actively invest resources to support the business operation and market development of the AI business founding team, so as to create additional growth momentum.

Profit forecast and investment advice. Relying on the layout of the whole industry chain in the electronic payment industry, the overseas "payment + terminal" business is expanding rapidly; at the same time, the domestic receipt industry has entered the stage of raising fees and increasing quality, and the company is expected to adjust its business strategy and keep up with the trend of raising fees in the industry. with greater profit flexibility, maintain the "buy" rating.

Risk tips: offline consumption recovery or less than expected; goodwill impairment risk; exchange rate fluctuation risk; industry competition intensification risk and so on.