In the first three quarters of 2023, the company realized revenue of 803 million yuan (+ 21.71%), net profit of 114 million yuan (- 8.69%) and non-net profit of 102 million yuan (- 11.71%). The rapid growth of revenue and the increase of project implementation costs lead to short-term pressure on the profit side. The company continues to cultivate smart medicine, digital government and smart city, speed up the exploration of various application scenarios of data elements, and continue to tap business value. Maintain the buy rating.

Support the main points of rating

Q3 gross profit margin is under pressure, and the effect of fee control is remarkable. 2023Q3 realized revenue of 285 million yuan (+ 19.95%), net profit of 29 million yuan (- 34.03%) and non-net profit of 25 million yuan (- 40.26%). The revenue growth was mainly due to the growth of software and operation and maintenance services in industries such as medical insurance, people's society, provident fund and so on.

Q3 single-quarter gross profit margin of 47.29% (year-on-11.39pct, month-on-4.31pct) and net profit margin of 11.37% (year-on-5.88pct, month-on-8.34pct) declined significantly, with an overall gross margin of 49.58% (- 9.82pct) in the first three quarters, mainly due to the extension of the company's project implementation, acceptance and sales payback cycle, and a large increase in project implementation costs, resulting in a decline in comprehensive gross profit margin. In the first three quarters, the sales / management / R & D expense rate was 13.07%, 10.50% and 10.19%, respectively, down 2.10pct/2.44pct/0.98pct from the same period last year, and the overall expense rate was 33.27% (- 5.38pct). The fee control effect is significant.

Actively explore the market of data elements and pay close attention to the digital economy. The fields such as smart health care, smart health insurance, digital government affairs and new smart cities are all important parts of the national digital economy development strategy. the company has a solid business foundation in many related fields: (1) the company fully supports the operation and maintenance of the medical insurance information platform in 23 provinces, and the medical and health business has covered more than 2800 hospitals in 20 provinces. (2) the Renshe business has covered 21 provinces throughout the country, and has undertaken 12 livelihood information projects, such as the Employment Management Information system of the Ministry of Human Resources and Social Affairs. (3) in terms of smart cities, the company continues to participate deeply in intelligent governance projects in Chengdu and Qingbaijiang District, and continues to build urban service solutions with the release of the value of data elements as the core. We believe that the company has deep business accumulation and breadth of coverage in related areas, and projects related to data elements will continue to reflect.

We will continue to cultivate the health insurance market and innovate health insurance services. National Healthcare Security Administration has successively issued the National Healthcare Security Administration measures for data Security Management, the Circular on issuing guidance on strengthening Network Security and data Protection, and the implementation opinions on strengthening the regular Supervision of the use of Medical Security funds and other relevant policies, fully empowering intelligent health insurance services such as health insurance data elements, convenient services, and payment reform. The company is the core business system of the national health insurance information platform and the developer of cross-provincial remote medical treatment platform. as of the first half of the year, the company's payment reform products cover 19 provinces across the country, and health insurance intelligent audit products cover 116 hospitals across the country. continue to carry out professional and intelligent innovative applications of health insurance.

Valuation

Maintain the forecast of net return of 256 / 337 million yuan in 2023 to 2025, 0.63 yuan and 1.03 yuan in EPS, corresponding to the times of PE in 39-29-23. Maintain the buy rating.

Main risks faced by rating

Macro environmental impact; government budget is lower than expected; market competition is intensified.