Insurance IT leader maintains “buy” rating
The company's software business continued to grow in the third quarter, and its profit level continued to rise. Currently, the company has plenty of orders in hand, providing strong support for subsequent growth. The company continues to increase investment in R&D, further improve its vertical MaaS platform, and actively promote the implementation of intelligent applications. The future is promising. We maintain our profit forecast unchanged. We expect net profit from 2023-2025 to be 7.99, 10.00, and 1,250 billion yuan, EPS of 1.35, 1.68, and 2.11 yuan. The current stock price corresponding to PE is 24.7, 19.8, and 15.8 times, maintaining the “buy” rating.
Profit levels continue to rise, and growth momentum is sufficient
In the first three quarters of 2023, the company achieved revenue of 3,921 billion yuan, a year-on-year increase of 0.74%, and net profit of 370 million yuan, a year-on-year increase of 21.34%. In the third quarter alone, the company achieved revenue of 1,290 million yuan, a year-on-year decrease of 2.97%, and net profit of 161 million yuan, a year-on-year increase of 12.93%.
(1) The software business continues to grow, and abundant orders provide strong support for subsequent growth. In the third quarter, the company's software business achieved revenue of 1,138 billion yuan, an increase of 1.84% over the previous year; the system integration business achieved revenue of 149 million yuan, a year-on-year decrease of 28.57%. The company's software business continued to grow, and the decline in revenue from the system integration business was mainly affected by the cyclical impact of project execution and acceptance. As of September 2023, the total contract amount for the company's unexecuted system integration projects exceeded 2 billion yuan. New orders for the company's software business and system integration business increased further year over year, providing strong support for the continuous development of various businesses.
(2) Profit levels continue to rise, and cash flow conditions have further improved. The company's gross profit margin and net profit margin in the third quarter were 35.93% and 12.45% respectively, up 4.22 and 1.75 percentage points from the previous year respectively. The company adheres to the “similar reuse” development concept, and the profit level continues to rise. In the first three quarters, the company received 3.631 billion yuan in cash for the sale of goods and services, an increase of 19.08% over the previous year. The net cash flow from operating activities was -1,095 million yuan, an increase of 319 million yuan over the previous year. The company further strengthened the management of receivables, and the cash flow situation further improved.
Continuing to increase investment in R&D, the MaaS platform can be expected in the future
The company is actively building a vertical AIGC application and industry reference model platform. The R&D expenses for the first three quarters were 702 million yuan, an increase of 6.92% over the previous year. The company continues to increase R&D investment, the vertical MaaS platform has been further improved, and the implementation of intelligent applications is also being actively promoted. The MaaS platform is expected to bring good development opportunities and can be expected in the future.
Risk warning: Insurance IT investment falls short of expectations; market competition intensifies; MaaS platform development falls short of expectations.