On October 26, the company released its performance report for the first three quarters of 2023. In 23Q3, the company achieved operating income of 466 million yuan, a year-on-year decrease of 22.77%; net profit of the mother was 4.43 million yuan, and the non-net profit of the mother was 33.23 million yuan, all of which were converted to losses year-on-year.

In the first three quarters of 2023, the company achieved operating income of 1,378 billion yuan, a year-on-year decrease of 13.78%; net profit of the mother was 88.92 million yuan, and non-net profit was deducted from the mother - 185 million yuan, all of which were also converted to losses year-on-year.

Intensify business development efforts, focus on Q4 delivery and next year's business outlook. Looking at the first three quarters, the company actively promoted business recovery and expansion. Various costs and expenses such as labor, travel, and conference services increased compared to the same period last year. However, due to factors in the macroeconomic environment, the government's bid opening and inspection progress fell short of expectations, causing the company's revenue growth to be under pressure during the reporting period, which led to a certain loss on the profit side. However, as the economic situation gradually recovers, and the fourth quarter is always an important time to confirm the company's project delivery, we believe that the company will achieve better delivery and acceptance results in Q4, thereby achieving better profit on the profit side. At the same time, we noticed that as of the end of Q3, the company's contract debt was 442 million yuan, an increase of 3.9% over the beginning of the year. In addition, the company is expected to achieve better business development in Q4. We believe that more active orders are expected to lay a good foundation for next year's performance growth.

Join hands with Huawei to accelerate the construction of a digital government. At the Huawei Full Connectivity Conference held on September 20-22, a number of integrated digital solutions and innovative practices jointly created by the company and Huawei were officially unveiled in the exhibition hall. These solutions fully demonstrate the company's core capabilities in one-network access, one-network management, and one-network collaborative digital solutions. They can efficiently meet the digital transformation needs of the government. They are expected to accelerate the refinement and intelligence of government management and public services, and help build a new form of government operation.

Investment suggestions: Considering that the overall economic recovery situation this year was weaker than expected, and the pace of progress of the company's various businesses was affected, we adjusted the company's revenue and profit forecasts. We predicted that the company's 2023-2025 revenue was 26.39/31.67/3.829 billion yuan (previous forecast value was 29.80/36.29/4.351 billion yuan), and net profit was 4.20/5.89/773 billion yuan (previous forecast value was 4.59/6.41/841 million yuan), corresponding PE was 28/20/ 15 times.

In the short term, the company's profit temporarily changed to loss during the reporting period due to factors such as slowing revenue growth and cost rigidity. However, we believe this did not affect the company's leading position and core competitiveness in the ToB business field. In the future, as the macroeconomic environment picks up and the corresponding spending power on the government side and enterprise side rebounds, the company is expected to further stabilize and expand its market share. Therefore, we maintain our “buy” rating.

Risk warning: risk of economic uncertainty; risk of government IT investment budget uncertainty; risk of increased industry competition, etc.