Investment events: The company released its three-quarter report for 2023: operating income for the first three quarters of 2023 was 236 million yuan, up 37.35% year on year; net profit from net income of 40 million yuan, up 33.24% year on year; net profit after deducting non-return net profit of 32 million yuan, up 35.54% year on year. In 2023, Q3 revenue alone was 133 million yuan, up 70.30% year on year; net profit was 30 million yuan, up 90.88% year on year; net profit after deducting non-return mother was 0.24 million yuan, up 54.97% year on year.
Also, it has brought about a high increase in revenue and strengthened the layout of the financial industry. The company's revenue for the first three quarters of 2023 was 236 million yuan, up 37.35% year on year, and Q3 revenue was 133 million yuan, up 70.30% year on year, mainly because the overall commercial cryptography industry maintained a good development trend and the company increased its market development efforts. In June 2023, the company acquired 66.93% of Jiangnan Keyou's shares for 151 million yuan, obtained control of Jiangnan Keyou, and achieved a strategic layout in the financial sector. The company announced an equity incentive plan at the end of September 2023. The total number of incentive recipients is no more than 28, all core employees of Guangzhou Jiangnan Keyou Technology Co., Ltd.; the number of restricted shares to be granted is 993,000, accounting for about 0.87% of the company's total share capital; the grant price is 34.10 yuan per share. Jiangnan Keyou needs to meet one of two performance assessment goals: based on 2022 operating income, the revenue growth rate in 2023 is not less than 20%; based on net profit in 2022, the net profit growth rate in 2023 is not less than 20%.
Single Q3 gross margin continued to increase month-on-month, increasing investment in R&D and sales. The gross margin of a single Q3 company in 2023 was 73.95%, up 1.96pcts from the second quarter. The company increased investment in R&D and sales. Among them, sales expenses/management expenses/R&D expenses in the first three quarters increased by 51.17%/27.46%/45.65% year-on-year respectively, mainly because the company increased its market development efforts, recruited high-level sales talents, and continued to bring in high-level R&D talents. The company's single Q3 net interest rate increased to 25.92%, a year-on-year increase of 6.04pcts, reflecting the company's stable profitability.
The commercial confidential market continues to be booming. The company releases new products of the year, bearing witness to the new power of cryptography. On April 14, 2023, the 4th Executive Meeting of the State Council revised and passed the “Regulations on the Administration of Commercial Passwords”, which will take effect from July 1, 2023.
The newly revised “Regulations on the Administration of Commercial Passwords” implement the basic institutional framework of the Cryptographic Law, and systematize and refine the commercial password management system. The company launched four new high-performance cryptographic chips, which are widely used in various scenarios, and released high-performance PCI-E cryptographic cards, blockchain cryptographic machines, full-scenario software cryptographic modules, cloud-native cryptographic service platforms, and cloud key management services. Among the four newly launched chips, the XT100 and XT200 are IoT security chips; the XR100 is a random number chip that supports industrial/expandable applications and automotive-grade design; and the XS100 is a high-performance cryptographic security chip, which is widely used in PCI-e cryptographic cards, server cryptographic machines, cloud computing, private computing, and blockchain.
Investment suggestions: We expect the company to have revenue of 457, 609, and 808 million yuan in 2023-2025, up 34%, 33% year on year; net profit of 1.46, 1.93, and 259 million yuan, up 36%, 32%, and 34% year on year. The company's 2023/2024/2025 EPS was 1.28/1.69/2.27 yuan respectively, giving it a “buy” rating.
Risk warning: policy implementation falls short of expectations, business development falls short of expectations, seasonal sales risks, and increased competition in the information security industry