Event: new World released its results report for the third quarter of 2023 on the evening of October 27. in the first three quarters of 2023, the company achieved operating income of 5.883 billion yuan, an increase of 6.43% over the same period last year, and a net profit of 818 million yuan, an increase of 119.83% over the same period last year. 891 million yuan was deducted from non-net profit, an increase of 87.84 percent over the same period last year.

The profitability of the order collection business has been enhanced, and the profit end of Q3 has increased significantly. In 2023, Q3, the company achieved operating income of 2.045 billion yuan, an increase of 9.17% over the same period last year, a net profit of 254 million yuan, an increase of 86.39% over the same period last year, and a deduction of 294 million yuan for non-net profit, an increase of 75.58% over the same period last year. The rapid growth at the profit end is mainly due to the fact that the company focuses on grasping the favorable conditions of the recovery of domestic offline consumption, continuously optimizing the cost structure and maintaining rapid growth in the profitability of the receiving business on the basis of steadily increasing the transaction scale.

The cost side is well controlled and the cash flow is abundant. 1) cost side: in the first three quarters of 2023, the year-on-year growth rate of sales / management / R & D was-0.44% and 1.29% respectively. While the cost of the cost was well controlled, revenue and profit still maintained a large growth. 2) Cash flow: the net cash flow generated by operating activities increased by 1.177 billion yuan, or 195.02%, over the same period last year, mainly due to the continuous growth of merchant operation and value-added services and digital payment terminal business during the reporting period. Due to the increase in cash received in response to the sale of goods and services, as well as the increase in net income, abundant cash flow is conducive to the follow-up business of the company.

The recovery of consumption is good for the receiving business, and the localization deployment of overseas business is accelerated. 1) offline consumption has continued to recover, and the scale of transactions has increased steadily: since the first half of the year, offline consumption has continued to recover. On July 28, 2023, the State Council forwarded the notice of the National Development and Reform Commission on measures to restore and expand consumption, promoting the further expansion of offline consumption. In terms of merchant operations and value-added services, the company focuses on grasping the favorable conditions of the recovery of domestic offline consumption, on the basis of steadily increasing the transaction scale. The cost structure has been continuously optimized, and profitability has maintained rapid growth. by the end of the third quarter, the company achieved a cumulative payment service transaction size of more than 1.93 trillion, an increase of 13.23% over the same period last year. 2) acceleration of localized deployment of overseas business and sustainable development of smart terminals: in terms of intelligent terminal clusters, the company continues to seize the opportunities for the rapid development of overseas mobile payments and actively deploy the markets in Southeast Asia, Central and East Africa, Europe, the United States and Japan. The scale of overseas business has maintained sustained growth. Overseas business revenue accounted for 74% of cluster revenue in the first three quarters of 2023, according to the latest Nielsen report. The company's 2022 payment equipment shipments have ranked first in the world.

Investment suggestion: the company's 23-25 net profit is expected to be 10.69,13.23 and 1.566 billion yuan respectively, with a year-on-year growth rate of 380%, 24% and 18%, respectively. The current market capitalization corresponds to the PE in 23-24-25, which is twice as much as 17-14-12. Considering the continued recovery of offline consumption in the fourth quarter of 2023 and the further expansion of the overseas payment market, the company's main business is expected to fully benefit and maintain its "recommended" rating.

Risk tips: intensified market competition; regulatory risks; can not continue to enjoy tax benefits; technical risks.