Introduction to this report:

The overall performance fell short of expectations, and the pace of investment in short-term informatization construction was disrupted; the company is a leader in the education recording and broadcasting circuit, strategically invested in Huasheng Jingshi to lay out vocational education, and it is expected that the higher education and vocational education business will gain strength.

Key points of investment:

The performance fell short of expectations, and the “increase in holdings” rating. Considering the impact of the pace of investment in informatization construction, the 2023-2024 EPS was lowered to 0.35/0.42 yuan (previous value 0.51/0.55 yuan), and the 2025 EPS was added to 0.47 yuan. Referring to the valuation of comparable companies, the PE valuation was 26.5 times that of 2024, and the target price was lowered to 11.13 yuan (previous value of 12.66 yuan), maintaining the “increase in holdings” rating.

Performance summary: The first three quarters of 2023 achieved revenue of 245 million yuan/yoy -1.88%, net profit of 58 million yuan/yoy -16.84%. Among them: 2023Q3 achieved revenue of 128 million yuan/yoy -8.82% in a single quarter, and net profit of 46 million yuan/yoy -20.06%. The overall performance fell short of expectations, mainly due to the pace of investment in informatization construction affecting order revenue carry-over; the profit side declined significantly, mainly due to the increase in business activities, and the year-on-year increase in expenses such as travel and labor costs.

Gross margin remains stable, and cost ratio optimization needs to wait until revenue is released. The gross profit margin of the 2023Q3 company was 71.62% /+0.91pct, and the cost structure remained stable; the net profit margin after deducting non-return was 35.96%, down 5.48% year on year, mainly due to a large increase in the period expense ratio. Business activities increased significantly compared to the same period in 2022. Sales expenses and management expenses rose due to exhibitions, advertising expenses, travel expenses and labor costs, but the revenue side declined due to the impact of order revenue carry-over pace. The sales/management expense ratio changed +5.07pc+2.62pct to 17.70%/ 11.19%

Ovia's transformation and upgrading is progressing at an accelerated pace, and the development of headquarters business is driven by two wheels. The company makes extensive use of machine vision and natural language processing technology in classroom analysis products, actively promotes the application of new technologies such as artificial intelligence, and enriches the product matrix; vigorously cultivates system capacity building, builds a library of integrated solutions for national and new cultural systems, builds a system integration ecosystem, and deepens the layout of central enterprise education support services.

Risk warning: order execution falls short of expectations, brain drain, increased market competition, etc.