Event: The company released its 2023 three-quarter report. The first three quarters achieved operating income of 1,404 billion yuan, an increase of 2.60% over the previous year; net profit of the mother was 139 million yuan, an increase of 3.26% over the previous year.
Performance grew steadily, and the actual controller proposed a repurchase. In the first three quarters of 2023, the company's gross margin was 48.11%, up 4.90 percentage points from the same period last year; net profit margin was 10.74%, up 0.34 percentage points from the same period last year. The company's R&D expense ratio and sales expense ratio have increased. On October 27, 2023, the company issued an announcement. The board of directors of the company received the “Letter on Proposed Repurchase of Company Shares” submitted by Mr. Che Quanhong, the actual controller and chairman of the company on October 26, 2023. The upper limit of the share repurchase price is not higher than 150% of the average stock trading price for the 30 trading days before the board passed the share repurchase resolution. The repurchase amount is not less than RMB 30 million and no more than RMB 60 million.
Launch smart retail brands to empower AI+ retail. In August 2023, the company's new smart retail brand, Entropy Cloud Alliance, launched a major online smart retail solution for entropy cloud convenience stores with the theme of “AI accelerates the intelligent evolution of convenience stores”. Entropy Cloud Connect covers platforms such as the one-stop smart new retail integrated management platform ZKDIGIMAX L3, the information release management platform ZKDIGIMAX CMS, and the electronic label control management platform ZKDIGIMAX ESL. It also integrates creative advertising content resources to target the “AI+ digital signage” circuit for the pan-retail and catering industry.
Investment advice: The company focuses on biometric technology and is in a leading position in the industry. Using the advantages of BioCV technology to lay out smart retail business and achieve scenario innovation, it is expected to usher in new development.
Currently, gross margin is improving steadily, and profit is returning to a growing trend. The company's 2023-2025 EPS is expected to be 1.22/1.68/2.15 yuan respectively, maintaining the “buy” rating.
Risk warning: AI progress falls short of expectations; company biometrics technology development falls short of expectations; upstream raw material prices are rising; industry competition is intensifying.