Incidents:
The company achieved revenue of about 3,921 billion yuan in the first three quarters, a year-on-year increase of 0.74%, net profit of 370 million yuan, and a net profit increase of 21.34% year-on-year. The third quarter alone achieved revenue of 1,290 million yuan, a year-on-year decrease of 2.97%, and net profit of 161 million yuan, an increase of 12.93% over the previous year.
The company continued to achieve steady profit growth for three quarters, and revenue fluctuated slightly in Q3.
In terms of revenue structure, software revenue for the third quarter was 1,138 billion yuan, up 1.84% year on year, while integrated business revenue was 149 million yuan, down 28.57% year on year. Based on this, it can be seen that the reason the company's Q3 revenue growth is slow is mainly due to the company's system integration business being affected by the cyclical execution and acceptance of large-scale projects. However, according to the company's announcement, as of the end of September 2023, the total contract amount for system integration projects that the company has not completed has exceeded 2 billion yuan. Considering the abundance of orders in hand, and judging from the historical experience of the revenue structure, the company's Q4 revenue accounts for a large share of the company's annual revenue. We believe that as the company's integrated business gradually carries out inspections, the company's Q4 is expected to unleash higher revenue elasticity.
Similar reuse continues to drive profit release and strengthen repayment management to improve cash flow.
The company's single Q3 gross margin reached 35.93%, a year-on-year increase of about 4.22pct; the company achieved a total profit of 159 million yuan, an increase of 31.25% over the previous year, and the company's gross margin continued to increase, driving profit release. We believe that the continuous increase in the company's gross margin is the result of internal adherence to the “similar reuse” development concept to improve development and service efficiency. In terms of cash flow, in the first three quarters, the company received 3,631 million yuan in cash from sales of goods and services, an increase of 19.08% over the same period last year. Net operating cash flow increased by 319 million yuan over the same period last year, and the overall cash flow situation improved further. We believe that the good repayment situation is expected to contribute to the narrowing of bad debt reserves for accounts receivable this year.
The recovery in premium growth is expected to accelerate the recovery of insurance IT investment. AIGC is driving further growth in industry demand, and insurance company prosperity in the first three quarters showed a gradual upward trend. Taking the premium growth rate from January to September as an example, the year-on-year premium growth rate in January was 3.86%, while the premium growth rate had climbed to 10.98% as of September. We believe that with the recovery of downstream, the demand boom in the insurance IT industry is expected to continue to rise from the second half of the year to next year.
At the same time, AIGC companies continue to deploy, and R&D focuses on important directions such as vertical AIGC applications, industry reference model platforms, “insurance+” ecological platforms, and data governance and analysis applications. While continuing to improve the vertical MaaS platform system for industry applications, it has further strengthened communication with the industry.
We judge that as the company continues to make efforts in the AIGC field, it is expected to promote the implementation of AIGC products and functions in intelligent application scenarios in various industries and expand the company's business market space.
Profit forecast: We expect the company's revenue for 2023-2025 to be 74.99/86.63/10.348 billion yuan, up 11.84%/15.53%/19.44% year on year; net profit from 2023-2025 will be 8.30/10.67/1,344 billion yuan, respectively, up 30%/28.49%/25.97% year on year, maintaining the “buy” rating.
Risk warning: the progress of financial innovation falls short of expectations; customer informatization investment and upgrade demand falls short of expectations; and the risk of industry competition is increasing.