Core views:

The company disclosed its 2023 three-quarter report. Operating income was 220 million yuan, up 30.0% year on year, 170 million yuan in the same period last year; net profit to mother was -270 million yuan, compared to -230 million yuan in the same period last year.

The gross margin increased significantly. In the first three quarters of 2023, the company's gross margin was 59.1%, an increase of 5.1 percentage points over the previous year. Looking at a single quarter, in 23Q3, the company's gross margin was 71.8%, an increase of 10.1 percentage points over the previous year. We believe that the increase in the company's gross margin reflects an increase in the share of revenue of software products with a high degree of standardization. In the future, with the upgrading of various functions of the company's software products, product competitiveness will continue to increase, and the revenue share of standardized software products will continue to increase, which is expected to drive a steady increase in gross margin and the company's overall profitability.

Revenue growth slowed in 23Q3, and contract liabilities increased quarterly. The 23Q3 company's revenue was 84.81 million yuan, up 15.0% year on year, which slowed down from the first half of the year. On the other hand, the company's contract liabilities showed a trend of quarterly growth. At the end of '22, the end of June '23, and the end of September '23, the company's contract liabilities were 225.8 million yuan, 29.27 million yuan, and 32.44 million yuan, respectively. We believe that public sector customers, which account for a certain percentage of the company, have seasonal characteristics in terms of IT expenditure procurement. As some products and projects are delivered centrally in 23Q4, the annual revenue growth rate is expected to remain at a high level.

Profit forecast and investment advice: The estimated revenue for 23-25 is 50 billion yuan, 680 million yuan, and 900 million yuan, respectively. We selected US stocks MongoDB, Snowflake, and Elastic as comparable companies from the perspective of business fields and business models. Considering the scarcity of A-share big data companies and the development prospects of AI software tool products, we gave the company a certain scarcity premium and gave the company a 23-year PS valuation of 20 times, with a corresponding reasonable total value of 10.01 billion yuan and a reasonable value of 82.83 yuan/share per share, giving it a “buy” rating.

Risk warning: the layout of the big data industry by technology giants and the risk of increased competition in the industry; the risk of large R&D investment and uncertainty in the transformation of results; the risk of uncertain investment in digital transformation in downstream applications.