Overview of events

According to the news on October 26, hand Information released its third quarterly report. According to the announcement, the company's operating income in the first three quarters was 2.251 billion yuan, an increase of 0.95% over the same period last year, and the net profit attributed to shareholders of listed companies was 40 million yuan, down 90.92% from the same period last year.

Analysis and judgment:

The independent software strategy advances steadily, and the company's performance is under short-term pressure.

The company's operating income in the first three quarters was 2.251 billion yuan, + 0.95% compared with the same period last year, of which: 1) independent software business (industrial digitization + financial digitization) continues to be the main source of growth. In the first three quarters of 23, compared with the same period last year, the revenue of independent software business was + 8.62%, and the proportion of total business also increased to 51.27% from 47.65% in the same period last year. The company's strategy of strengthening independent software business is still effectively implemented. Among them, the growth rate of industrial digital business is the most obvious, + 14.74% compared with the same period last year. 2) from the beginning of the year to the end of the reporting period, the company realized a net profit of 40 million yuan belonging to the shareholders of the listed company,-90.92% compared with the same period last year. Mainly due to the large non-recurrent profit and loss (Shanghai Zhenhui Information Technology Co., Ltd.) restructuring and completion of capital increase and share expansion, the company's equity stake in Zhenhui Technology (or the restructured Cayman Company) decreased to 19.36%.

Affected by the general environment and AIGC, the overall expense rate has increased, and the rise in gross profit margin of independent software has led to a stable overall gross margin.

1) in terms of gross profit margin in the first three quarters, the overall gross profit margin is basically the same as that in the same period last year. Thanks to the continuous improvement of the maturity of independent software products and the continuous optimization of implementation methods, the gross profit margin of industrial digital business in the first three quarters of 23 years was 36.46%, compared with 35.18% in the same period last year and + 1.28 pct year on year, driving the gross profit margin of independent software business to continue to rise. 2) in terms of sales expenses, affected by the general environment, the overall recovery downstream is slower, the order conversion cycle becomes longer, the company continues to maintain business development efforts, and the business development investment is larger than last year. Secondly, the management cost is slower due to the overall recovery downstream. The conversion of demand orders is not as expected, resulting in related management costs caused by underutilization of some personnel. Finally, the R & D cost is increased due to the company's continuous R & D investment in the field of AIGC application capability this year.

Integration technology in Taiwan HZERO-based, AIGC and data management as the wing, the four main business is expected to enter a new stage of development.

1) the company has formed a core digital service capability system of "1-2-4", which will provide comprehensive services for the upgrading digital transformation of enterprises with profound implementation capabilities and systematic product capabilities. 2) the company's exploration and development of AIGC application business has three in-depth directions: tools (AIGC middle platform) + scenario applications (marketing, manufacturing, finance, supply chain, etc.) + private model. Based on years of accumulation in the field of digital and artificial intelligence, based on the independent research and development of enterprise-level PAAS platform-Hande fusion technology in Taiwan HZERO, research and development to create "Hande AIGC in Taiwan H-Copilot", the industry took the lead in realizing the production and scene landing of AIGC application capabilities, and made good progress in market promotion, with high customer recognition. 3) in terms of data management and application capabilities, H-one provides data life cycle management service capabilities and perfect data enabling system for data aggregation, data development, data governance, data assets, data services, data analysis and data operation. Hande data Intermediate H-one has been widely recognized by various professional institutions, including DAMA,DCMM. Big data Technical Standards Promotion Committee meeting, CDP and other professional organizations certification.

Investment suggestion

According to the company's three-quarter report, we lowered the company's revenue forecast for 2023-2024 by 3.745 billion yuan to 35.68 billion yuan, increased the 25-year forecast by 4.073 billion yuan, and reduced the company's 2023-2024 EPS by 0.33 pound 0.55 yuan to 0.13 pound 0.17 yuan, and the new 25-year forecast of 0.21 yuan. Corresponding to the closing price of 8.18 yuan per share on October 27, 2023, the PE was 64.26, 49.32, 39.47 times, respectively. Maintain the company's "buy" rating.

Risk hint

The intensification of competition in the industry leads to the decline of profitability, the process of core technology breakthrough is lower than expected, and the risk of loss of core talent team.