Event

According to the company's three-quarter report for 2023, the operating income in the first three quarters of 2023 was 236 million yuan, an increase of 37.35 percent over the same period last year; the net profit was 40 million yuan, an increase of 33.24 percent over the same period last year; and the net profit was 32 million yuan, an increase of 35.54 percent over the same period last year.

For Q3 alone, 2023Q3 achieved operating income of 133 million yuan, an increase of 70.3% over the same period last year; net profit of 30 million yuan, an increase of 90.88% over the same period last year; and net profit of 24 million yuan, an increase of 54.96% over the same period last year.

Comment

And show the friends of Jiangnan, the performance exceeded expectations.

The company's 2023Q3 revenue growth and profit growth exceeded market expectations in a single quarter, which we believe is mainly due to: 1) the continued in-depth cooperation between the company and operators in Cloud password, winning bids for Tianyi Cloud, Mobile Cloud and other projects; 2) the acquisition of Jiangnan Keyou, a password security company in the financial sector, in June 2023, and 2023Q3 merging Jiangnan Keyou.

The merger table led to a substantial increase in expenses, but the overall profitability of 2023Q3 single-quarter R & D and sales expenses increased by 85.3% and 67.61% respectively compared with the same period last year. The main reasons are: 1) after the listing of the company, the financial strength and brand reputation of the company are enhanced, and the investment in R & D and sales side is increased to further consolidate the competitiveness of the company; 2) and list Jiangnan Keyou.

But on the whole, the company has maintained a relatively sound profitability. The company's 2023Q3 single-quarter gross profit margin was 73.95%, down 3.86 pct from the same period last year; the net profit margin was 25.92%, up 6.04pct from the same period last year. In the case of a decline in gross profit margin compared with the same period last year, the net profit margin increased significantly compared with the same period last year. We believe that after the completion of the collaborative integration with Jiangnan Keyou, the gross profit margin and net profit margin are expected to further improve.

Profit forecast and valuation

Taking into account the revenue and profit side boost brought by the company's acquisition of Jiangnan Keyou, we estimate that the company's operating income in 2023-2025 will be RMB 475 and RMB 592 million, and its net profit will be RMB 1.32pm. Net profit will be RMB 221 million, with reference to the closing price on October 27, 2023, which corresponds to a price-to-earnings ratio of 41-31-24, respectively, maintaining a "buy" rating.

Risk hint

The process of self-development of the Internet of things chip landing is not as expected; the industry competition is intensified; the password industry policy is not as expected; the technical brain drain and so on.