In the first three quarters, the company's contract volume for emerging security businesses such as cloud security, data security, credit security, and MSS continued to rise, cost control was optimized, and the release of the Hengneo-Security Subdomain model added AI, maintaining a “highly recommended” investment rating.

Event: The company released the report for the third quarter of 2023. In the first three quarters, the company achieved operating income of 1,207 million yuan, YoY +16.14%; net profit of 536 million yuan, YoY -17.20%; net profit after deduction of 556 million yuan, YoY -16.14%; net operating cash flow - 677 million yuan, YoY -23.76%. 23Q3 achieved operating income of 512 million yuan in a single quarter, YoY +1.35%; net profit of the mother - 127 million yuan, YoY - 48.56%; net profit after deducting non-return net profit - 134 million yuan, YoY -42.32%.

The contract amount for emerging security orders has increased rapidly, and cost control continues to be optimized. Q3 In a single quarter, the company achieved positive revenue growth against the backdrop of a slowdown in the overall growth rate of the industry; by product, emerging security businesses such as Anheng Cloud - Tianchi Cloud, Data Security, Innovation Security, and MSS hosting and operation services continued the high growth trend in the first half of the year, achieving a high order growth rate. Among them, data security-related/MSS security hosting and operation services/credit innovation-related contracts increased 50% +/ 50%/nearly 170% year on year in the first three quarters; by industry, the company achieved rapid year-on-year growth in operator and central state-owned enterprise industries, and achieved revenue of/170% in the first three quarters YoY Growth has also achieved rapid growth in industries such as Internet communication, education, health care, and government. The company achieved a gross profit margin of 56.03% (year-on-year -1.37pct) in the first three quarters. Among them, the gross margin of the security service business increased by more than 4 pct, and the efficiency per capita sales increased by 20% over the same period last year, achieving continuous growth. The company's sales/management/R&D expenses for the first three quarters were 56.81%/12.35%/43.54%, respectively, with year-on-year changes of 1.05/-1.97/-1.12pct, and cost control continued to be optimized. Q3 Net profit for a single quarter declined year-on-year. Consider that the main reason is that the company's operating performance fluctuated greatly seasonally, but as the scale of operations expanded, rigid personnel costs increased, leading to increased seasonal losses.

The “Heterogenesis and Safety Peripheral Domain Model” was officially released, and AI+ security helped break through. In August of this year, the company's Heternathomal Safety Peripheral Domain Model was publicly unveiled for the first time, and a new upgrade of the safety operation platform based on the Safety Peripheral Domain Model was released. In the future, the Hengneo-Security Domain Model will be integrated into all products and applied comprehensively, becoming the foundation of the company's security capabilities, providing the driving force for the comprehensive upgrade of Anheng's information and data security strategy, MSS strategy, and talent strategy. Anheng's information development strategy continues to be updated and iterated, and data, AI, and service form the troika of Anheng Information 2.0 era.

Maintain a “Highly Recommended” investment rating. The company's net profit from 2023-2025 is estimated to be 0.27/2.03/390 million yuan. The scale of the emerging security business is expected to continue to grow. The release of a large-scale security model to add AI and maintain the “highly recommended” rating.

Risk warning: policy implementation falls short of expectations, industry competition intensifies, costs rise