Event: on October 30, Wealth Trends released its Triple report for 2023. 9M23 Company's operating income is 250 million yuan / yoy+26.1%, return net profit is 2.0 billion yuan / yoy+196.5%, deducts non-net profit 160 million yuan / yoy+21.7%.
The high performance of 3Q is expected to accelerate the improvement of project rebate. 1) the high profit of 3Q company: 3Q23 company realized operating income of RMB1.0 billion / yoy+26.7%/qoq+22.9%, realized net profit of RMB 80 million / year-on-year reversal of loss / qoq+27.0%, single-quarter performance increase is expected to be mainly due to the continuous improvement of the company's B-end project payback (3Q company contract debt qoq-6.4%). 2) improvement of operating cash flow: the cash received by 3Q23 for selling goods and providing services is 100 million yuan / yoy+12.7%, net cash flow from operating activities is 0.67 billion yuan / yoy+7.4%.
The company continues to improve quality and efficiency, and its profitability continues to be repaired. 1) the company has good cost control: the sales expense rate, management expense rate and R & D expense rate of 9M23 are 2.41%, 2.78% and 19.5% respectively, which are + 0.41pct,-0.72pct and-2.77pct respectively compared with the same period last year. The increase in sales expenses is expected to increase mainly because the company increases sales efforts to increase employee compensation and other expenses. 2) profitability month-on-month repair: 9M23's gross profit margin is 81.4%/yoy-0.53pct/qoq+0.84pct.
The transformation of the financial industry and the deepening of capital market reform went hand in hand, and the B-end business of the company accelerated. At present, the penetration rate of the company's PC side in the securities firms has basically reached 100%. At the same time, the company continues to expand its product category and overseas layout, and the competitiveness of the B-end business continues to improve. 8x28 increased capital to its Hong Kong subsidiary by RMB200m to further expand the Hong Kong market; 10Company29 signed an "equity transfer contract" with SHINE Saut to transfer 33% of the equity of Xinyi Technology to enhance the competitiveness of the securities IT business.
The scale of C-end business customers is growing steadily, the company attaches importance to the improvement of C-side operation capacity, and the follow-up repair of market activity is expected to boost business growth. 1) the company continues to improve the C-end operation capability: since 2023, the company has strengthened the building of C-side business operation team and continuously iterated the product matrix; built an open AI platform to expand the business scenario from small to general mobile phone scenarios. 2) the scale of C-side customers has increased steadily: as of September, the number of monthly active users of Tongxin APP has reached 1.934 million / yoy+7.3%,. The subsequent market trading activity has warmed up and the company has increased its operation investment, which is expected to lead to a high increase in C-end business income.
Investment analysis: maintain the wealth trend "highly recommended" rating. We estimate that the net profit of fortune trend 23-25e is 3.0,4.1 and 470 million yuan, which is + 95%, + 37% and + 14% compared with the same period last year. The current total market capitalization corresponds to 62.2,45.5,40.0 times of the dynamic PE for 23-25 years, respectively.
Risk hint: C-side business progress is not as expected; financial credit landing rhythm is not as expected; investment return is not as expected.