Events: The company released its report for the third quarter of 2023. In Q3 of 2023, the company achieved revenue of 161 million yuan, a year-on-year decrease of 27.85%, and realized net profit of 0.06 billion yuan, a year-on-year decrease of 72.63%; in Q1-Q3 of 2023, the company achieved revenue of 551 million yuan, a year-on-year decrease of 10.13%, and realized net profit of 51 million yuan, a year-on-year decrease of 18.34%.
Short-term performance is under pressure, and profitability remains at a good level. According to the company's 2023 quarterly report, in Q3 of 2023, the company achieved revenue of 161 million yuan, a year-on-year decrease of 27.85%, and realized net profit of 0.06 billion yuan, a year-on-year decrease of 72.63%, mainly due to delays in the implementation of some ongoing orders, acceptance and delivery, and delays in receipt and settlement, which had a certain impact on the transformation of the company's business orders and revenue recognition. The increase in R&D investment in cutting-edge technologies such as data products and government models has put pressure on profits.
In Q1-Q3 of 2023, gross margin increased by 2.65% year on year, and in Q3 of 2023, gross margin increased 2.5% year on year. Profitability remained at a good level.
The scenario application software platform sub-business in the one-card and AIoT application business continues to gain strength. According to the company's 2023 semi-annual report, as of 2023 H1, the company has successfully launched a one-card platform for residents in more than 50 cities in 10 provinces including Anhui, Guangdong, Hubei, and Jiangsu using the “data base+central platform+scenario” approach. According to the company's 2023 three-quarter report, the company's scenario application platform revenue maintained the growth trend in the first half of the year. The revenue of the Q1-Q3 scenario application platform increased 96.81% year on year in 2023, and the revenue of the Q3 scenario application platform increased 51% year on year in 2023.
Investment suggestion: As a leading integrated service provider for people's livelihood in China, the company has formed two major commercial closed loops, focusing on the “One Card for Resident Services” and “Resident Data”. It will continue to benefit from the construction of a card scenario and the rapid development of the data element market in the future. In 2023-2025, we expect the company to achieve operating income of 874 million yuan, 1,007 million yuan, and 1,298 million yuan, net profit of 101 million yuan, 145 million yuan, and 186 million yuan, corresponding EPS of 0.23 yuan, 0.34 yuan, and 0.43 yuan respectively. The PE multiples corresponding to the current stock price are 45X, 32X, and 25X respectively. Considering that the company is a leader in the industry segment, it has a clear competitive advantage and maintains a “buy” rating.
Risk warning: the risk of exchange rate fluctuations, AI and other new technologies falling short of expectations, and the risk of fluctuations in overseas economies.