Incidents:
The company achieved operating income of 1,177 billion yuan in the first three quarters, an increase of 11.49% over the previous year; realized net profit of 1,6402 million yuan, a year-on-year decrease of 72.76%; and net profit corresponding to deductions of -58718 million yuan, a year-on-year decrease of 25611.57%. In the third quarter alone, the company achieved operating income of 428 million yuan, an increase of 14.37% over the previous year; realized net profit of 1.588 million yuan, an increase of 1623.48% over the previous year; and realized net profit of 10.3299 million yuan, an increase of 428.88% over the previous year.
Gross margin repair has begun, and cost reduction and efficiency have continued to drive the company's profit recovery. The company's sales/management/finance/R&D expenses in the first three quarters were 9.73%/14.52%/0.80%/8.54%, with year-on-year changes of +1.57/-0.65/-0.65/-0.64/-1.13pct; the total period expense rate was 33.59%, down 0.85pct year on year.
The gross margin for the third quarter alone was 30.33%, up 3.19pct year on year; corresponding net profit margin was 2.70%, up 2.91pct year on year. As cost reduction and efficiency increase and post-epidemic delivery advances, the company's gross margin for a single quarter may have reached an inflection point year over year.
Uninspected projects suppressed the release of net profit, and demand for orders was strong, waiting for reports to improve. The company's inventory at the end of the third quarter increased by 32.85% compared to the beginning of the year, mainly due to the increase in the cost of uninspected projects. We believe that the increase in uninspected projects is mainly due to the long delivery cycle of the company's core system series products. However, from the 32.94% year-on-year increase in Q3 sales expenses, it can be seen that the current strong demand for core systems in downstream was derived from the first half of the year to Q3. Therefore, we judge that at a time when abundant orders are compounded by improved profitability, the company is expected to continue to interpret the scissor gap in revenue and profit in the future.
Firmly investing in research and development of overseas products, the company's overseas products have moved from the core of the Internet to a wider market. The company has continued to go overseas for more than six years. Currently, it has more than 60 customers in Southeast Asian countries such as Malaysia, Thailand, and Indonesia who have purchased and used core Internet products for a long time. However, at present, there are business opportunities for overseas markets to move downwards and systems to the cloud. Through early knowledge and product reserves, the company has participated in many POC and bidding activities in the Southeast Asian market, while seeking market opportunities for modern core replacement. As products gradually mature, the company's core system going overseas is expected to become another core growth pole for overseas business in the future.
Profit forecast: Due to the long delivery cycle of core system series products, which had a certain impact on the company's short-term performance, we lowered the company's 2023-2025 revenue to 21.38/24.47/31.33 billion yuan, respectively, up 13.31%/14.45%/28.02% year on year (previous value of 2023-2024 was 24.52/3,311 billion yuan); net profit from 2023-2025 was 0.88/1.74/276 billion yuan respectively (previous value of 2023-2024 was 2.45/ 358 million yuan), up 290.12%/98.51%/58.93% 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 product promotion progress falls short of expectations.