The company released its three-quarter report for 2023. 23Q3 revenue/net profit was 625.06 billion yuan respectively. Net profit exceeded 100 million yuan for the first time in a single quarter, and the effect of increasing capital during the year was remarkable. Saiyi Information's proposed acquisition of Sino Bo will also help it expand the central state-owned enterprise market and business layout in the northern region. We believe the long-term development prospects of the company are optimistic. We maintain the company's 2023-2025 EPS forecast at 0.65/0.87/1.19 yuan. According to comparable company valuations, we gave the company 36 times PE in 2024, corresponding to the target price of 32 yuan, maintaining the “buy” rating.
The company released its 2023 three-quarter report, with a record high net profit in a single quarter.
In terms of overall revenue, 23Q1-Q3 had revenue of 1,682 million yuan, +0.99% year-on-year; 23Q3 revenue was 625 million yuan, -2.32% year-on-year.
In terms of profit, the company's net profit for the first three quarters was 128 million yuan, -15.86%; net profit after deducting non-attributable net profit of 109 million yuan, -21.51%; Q3, net profit of the company to the mother was 106 million yuan, +25.15%; and net profit after deduction of 96.87 million yuan, +19.07% year-on-year. Net profit exceeded 100 million in a single quarter, reaching a record high.
In terms of expenses, the company's Q3 sales/management expense ratio was 5.78%/5.55% respectively, -0.70/-1.39pcts year-on-year and -1.91/-0.34pcts month-on-month. Fee control was effective. 23Q1-Q3 R&D expenses were 230 million yuan, +27.21% year-on-year. This corresponds to development expenditure of 287 million yuan at the end of Q3, an increase of 56.85% compared to 183 million yuan at the end of 2022, and increased R&D efforts.
In terms of cash flow, the net increase in cash and cash equivalents in the first three quarters was -183 million yuan, -73.54% year-on-year, mainly affected by a combination of operating, investment, and financing cash flows. Among them, the net cash flow from operating activities was 11.71 million yuan, -50.57% year-on-year, mainly due to an increase in cash payments from operating activities. We believe it is related to remuneration payments for company employees, etc.
The advantages in the pan-ERP field are stable, and the recognition of intelligent manufacturing continues to increase. In terms of ERP, the company closely followed the pace of Huawei and participated deeply in the MetaERP strategy. In August, its Ceres Industrial Internet platform was selected for the Ministry of Industry and Information Technology's 2023 “Double Cross Platform” list. It is expected that it will join hands with Huawei to open up the incremental market and stock market for high-end ERP for central state-owned enterprises.
In terms of intelligent manufacturing, according to the MES market analysis report released by IDC in October 2023, the company ranked first in high-tech electronics MES market share in 2021-2022, first in the market share of household appliances MES in 2022, and second in the market share of new energy MES in 2022. Its position in the industry has been further recognized by the market, and self-developed products have taken the lead in domestic enterprise applications to achieve domestic substitution.
Acquire Snobo to expand the industrial landscape and efficiently lay out the central enterprise and group markets. On September 24, 2023, the company announced that its wholly-owned subsidiary plans to acquire 100% of Beijing Sinobo's shares. This acquisition will help the company expand the northern market and enter central state-owned enterprise customers, respectively. In the past, the company's customer base was mainly private enterprises. Using Sinobo's customer resources and channels will further expand the market share of central enterprises and group enterprises in the field of digital construction. Furthermore, after the completion of this acquisition, it will also benefit the company's business layout in the northern region and further accelerate the company's business development in the fields of pan-ERP enterprise informatization and industrial digital self-developed products.
Risk factors: risk of increased market competition, risk of customer expansion and integration falling short of expectations, risk of digital transformation of manufacturing enterprises falling short of expectations, risk of self-developed product promotion falling short of expectations, risk of macroeconomic recovery falling short of expectations; risk of unsuccessful acquisitions or progress falling short of expectations.
Profit forecasting, valuation and ratings: The company has been deeply involved in the enterprise digital market for a long time and is expected to benefit deeply from the medium- to long-term development trend of intelligent manufacturing. We maintain the company's 2023-2025 EPS forecast of 0.65/0.87/1.19 yuan. Referring to the comparable company Wind's 2024 consensus forecast PE, Hande Information (26x), Dingjie Software (27x), Pan-Micro Network (37x), Runhe Software (55x), average value 36x, giving the company 36 times PE in 2024, corresponding to the target price of 32 yuan, maintaining a “buy” rating.