Policies continue to be catalyzed to maintain the “buy” rating

The company is a leading enterprise in medical informatization and digital government in China. Health insurance data elements are expected to open up room for growth. We maintain our original profit forecast. The estimated net profit for 2023-2025 is 2.55, 3.15, and 391 million yuan, and EPS is 0.62, 0.77, and 0.96 yuan/share. The current stock price corresponding to PE is 44.4, 35.8, and 28.9 times, maintaining a “buy” rating.

Event: The company released its 2023 three-quarter report. Revenue grew steadily in the first three quarters of 2023. In the first three quarters of 2023, the company achieved operating income of 803 million yuan, an increase of 21.71% over the previous year; realized net profit of 114 million yuan, a year-on-year decrease of 8.69%. In the third quarter alone, the company achieved operating income of 285 million yuan, an increase of 19.95% over the previous year, and realized net profit of 29 million yuan, a year-on-year decrease of 34.03%. The company's operating income achieved steady growth, mainly due to the increase in revenue from software and operation and maintenance services in industries such as health insurance, human resources, and the Provident Fund.

The company has achieved a steady increase in orders, and there are sufficient orders in hand. Future performance releases are worth looking forward to.

Cost control results continue to be released, and cash flow has improved markedly

Affected by factors such as macroeconomic fluctuations, the company's project implementation, acceptance and sales repayment cycles have been extended, and project implementation costs have increased significantly, leading to a decline in overall gross margin. The company's cost control results continued to be realized in the first three quarters. The period fee rate declined markedly. The sales expenses rate fell 2.10 percentage points to 13.07% year on year, the management expenses rate fell 2.44 percentage points year on year to 10.50%, and the R&D expenses rate fell 0.98 percentage points year on year to 10.19%.

In the third quarter alone, the company achieved net cash flow from operating activities of $14 million, which was positive year on year.

The National Bureau of Data is listed, and the development of the data factor market is expected to accelerate. On October 25, the National Bureau of Data was officially listed in Beijing. With the confirmation of the leadership team of the National Bureau of Data and the further implementation of the internal organizational structure, progress in data element market construction is expected to accelerate. The company is actively developing capitalization, commercialization, and service innovation of health insurance data elements. The company's “Hospital Disease Diagnosis and Treatment Path Knowledge Base and Medical Expense Analysis System” became the first batch of data capabilities listed on the Guangzhou Data Exchange. Also, according to the company's public account, the company has passed the qualification examination and has become a data provider for the Shenzhen Data Exchange and the Guiyang Big Data Exchange. In the future, as the company continues to expand data element scenario services, it is expected that it will take advantage of the data element policy to accelerate growth.

Risk warning: policy implementation falls short of expectations; market competition intensifies; company technology research and development falls short of anticipated risks.