Event: Zhuoyi Information released its report for the third quarter of 2023. In the first three quarters of 2023, the company achieved operating income of 233 million yuan, an increase of 28.05 million yuan; net profit of 54.06 million yuan, an increase of 71.35% over the previous year; and net profit of about 5.22 million yuan, a year-on-year decrease of 59.75%.
Q3 Revenue grew steadily, and consulting fees and stock payments dragged down short-term net profit: the company continued its steady growth trend in the third quarter and achieved operating income of 98.18 million yuan in the third quarter, an increase of 28.87% over the previous year; the gross sales margin for the third quarter was 50.25%, an improvement over the previous two quarters. The company's non-net profit withheld remains under pressure, mainly due to a large increase in management expenses due to acquisition consulting fees and share payment fees. The company incurred management expenses of 53.09 million yuan in the first three quarters, an increase of 138.26% over the previous year, of which share payment expenses were about 18 million yuan. The previous equity incentive plan showed that expenses to be amortized in 2024 were about 6.59 million yuan, and the company's net interest rate is expected to be restored.
Aipuyang Shenzhen completed the merger: The company completed the merger of Aipuyang Shenzhen's reports. In 2021-2022, Aipuyang Shenzhen achieved operating income of 7596 million yuan and 87.18 million yuan, and net profit of 32.43 million yuan and 40.52 million yuan respectively. The corresponding net interest rates were about 42.69% and 46.48%, respectively. Aipuyang and Shenzhen promised to achieve a net cash flow of not less than 45 million yuan in 2023. If successfully achieved and a steady development trend is maintained in the future, it is expected to have a positive impact on the company's profitability.
The arrival of AI PCs may drive firmware development: Intel announced that it will officially release the next-generation Intel Core Ultra processor in December this year to accelerate the advent of the “AI PC” era, and announced the “AI PC Acceleration Plan” in October, announcing that it will provide software partners with engineering software and resources to achieve artificial intelligence characteristics for more than 100 million PCs by 2025. The increase in hardware complexity may promote the upgrading of the firmware industry, thereby driving value volume. The company is expected to benefit as a leader in domestic firmware.
Investment suggestion: Based on the favorable trend of innovation in the industry and the driving effect of AI PCs on the future of the industry, it is expected that there will be room for further increase in the sales volume and unit price of the company's firmware business in the future. It is estimated that the company will achieve operating income of 411 million yuan, 5.97 million yuan and 746 million yuan, net profit of 0.95, 1.48 million yuan and 206 million yuan respectively in 2023-2025, corresponding to EPS of 1.09, 1.70, and 2.37 yuan, respectively. Maintain a “buy” rating.
Risk warning: Product development falls short of expectations, market demand falls short of expectations, and market competition intensifies.