Key points of investment:
The company released three quarterly reports: revenue for the first three quarters of 2023 was 1,648 million yuan, a growth rate of 12.63%; net profit was 248 million yuan, a decrease of 171 million yuan; net profit after deducting non-net profit - 264 million yuan, a loss of 194 million yuan. All shares held by Mingtai Capital have been registered and transferred through judicial auctions.
Q3 The company's revenue and profit improved significantly from month to month. Q3 revenue was 644 million yuan, a growth rate of 10.32%, an increase of 20.05% over the previous month. In the first three quarters, the company became the only 3 companies in the industry that maintained high net profit growth. Since the company has recovered relatively well on orders in 2023, we expect that with the implementation of 1 trillion treasury bonds, industry demand in the fourth quarter will also recover relatively well, which will help release the company's annual performance (accounting for 55% of Q4 revenue in a normal year).
Q3 The company's innovation and cloud computing business performed well, and the government industry recovered significantly. As the company with the largest number of innovators in the cybersecurity industry, the company continued to maintain a high growth rate of 185.73% in the first three quarters after Xinchuang grew by 74.27% in the first half of the year. The growth rate of the cloud computing business has also clearly rebounded. From a slight increase in the semi-annual report to a 35.83% increase in the three-quarter report, it has returned to a high growth trajectory. In the industry, revenue from the government achieved a high growth of 32.62%, of which revenue from local governments increased by 43.9%.
The company's gross profit margin, expense ratio, and cash flow are all showing a positive trend. The gross profit margin of the Q3 company is 73.03%, the highest since 2021 Q4. Although Q3 revenue is at a steady growth rate, the quality of revenue is very high. In 2023, the company's overall cost side was on a tightening trend; only sales expenses continued to grow. Q3 The company's operating cash flow was 112 million yuan. On the basis of loss in net profit, it still obtained positive cash flow.
Maintain the company's “buy” investment rating. After investing heavily in R&D over the past few years, the company has advantages in some major new product tracks. Among them, the advantages of the innovation business are particularly obvious, which is expected to bring continued high growth to the company. The company's EPS is expected to be 0.47 yuan, 0.58 yuan, and 0.68 yuan respectively in 23-25. According to the closing price on November 6, 9.59 yuan, corresponding PE is 20.51 times, 16.45 times, and 14.13 times.
Risk warning: Competition in the industry is intensifying; the economic situation affects the government budget.