Intelligent manufacturing leads and maintains “buy” ratings

The company is a leading enterprise in the fields of industrial Internet, intelligent manufacturing, and core ERP in China. It is the core partner of Huawei MetaERP and is expected to benefit from the promotion opportunities of Huawei MetaERP. We maintain our original profit forecast. The estimated net profit for 2023-2025 is 2.63, 3.20, and 396 million yuan, and EPS is 0.65, 0.79, and 0.98 yuan/share. The current stock price corresponding to PE is 37.1, 30.5, and 24.7 times, maintaining the “buy” rating.

Event: The company released the 2023 three-quarter report. Q3 profit increased rapidly in the first three quarters of 2023. The company achieved operating income of 1,682 million yuan, an increase of 0.99% over the previous year; net profit of 128 million yuan, a year-on-year decrease of 15.86%. In the third quarter alone, the company achieved operating income of 625 million yuan, a year-on-year decrease of 2.32%; realized net profit of 106 million yuan, an increase of 25.15% over the previous year. Q3 profit growth accelerated month-on-month, and increased profitability, mainly due to an increase in gross margin of 6.21 percentage points to 40.1% year on year.

Pan-ERP: Jointly with Huawei to benefit from MetaERP promotion, acquisition of Sinobo to improve the market layout of central state-owned enterprises, the company attended the Huawei “Heroes Crossing the Dadu River” MetaRP commendation conference in April. In September, as HUAWEI CLOUD's highest-level partner in the same boat, the company attended the Huawei Full Connectivity Conference 2023. The company has HUAWEI CLOUD full-stack qualifications and has in-depth cooperation with Huawei in the fields of sales, solutions, consulting and service. In the future, it is expected that it will follow the pace of Huawei in deepening the MetaERP strategy and benefit from MetaERP promotion opportunities in the long term.

On September 24, the company announced that Shanghai Saiyi, a wholly-owned subsidiary, will acquire 100% of the shares of Snobo for 211 million yuan. The transaction will help to further improve the company's business layout throughout the country, especially in the northern region; further accelerate the company's business development in the fields of pan-ERP enterprise informatization and industrial digital self-developed products; thus increasing the company's market share in the field of digital construction of central enterprises and group enterprises with great potential for development and strong momentum.

Intelligent manufacturing: Selected into the Ministry of Industry and Information Technology's “double cross-platform” list, which is expected to accelerate growth by leveraging policy trends. On September 6, Saiyi Gushen Industrial Internet Platform was successfully selected into the Ministry of Industry and Information Technology's “Double Cross-Platform” list in 2023. Currently, the platform has accumulated a total number of industrial models and thousands of apps on the application market. At the same time, the Ceres APaaS platform has now completed product adaptation with many mainstream domestic manufacturers such as Huawei & Kunpeng, and has achieved full localization from chips to operating systems and databases. We believe that the company's selection on the “Dual Cross-Platform” list fully demonstrates the company's comprehensive capabilities, and it is hoped that it will take advantage of policy trends and enter the blue ocean of intelligent manufacturing for central state-owned enterprises.

Risk warning: MetaERP promotion falls short of expectations; market competition intensifies; company R&D falls short of expectations, etc.