The average growth rate of the industry has clearly slowed, and we have lowered the company's annual revenue growth expectations. We have counted some companies in the industry that are comparable to CICA Technology. The total revenue growth rate in the first three quarters was generally low, with an average year-on-year growth rate of 0.26%, reflecting the impact of the IT information technology industry on the macroeconomy this year. The company's revenue growth rate in the first half of the year was 5.6%. The traditional and BSS business remained stable as a basic market. iResearch showed a negative growth rate of 6% (affected by macro and internal restructuring), and the vertical and OSS businesses maintained a reasonable growth rate. Combining the comparable company's performance in the first three quarters, the company's semi-annual report and its own business characteristics, we expect that CICA Technology's total revenue growth rate for the whole year may be basically consistent with the semi-annual report (around 5%). Among them, traditional business and BSS business continue to maintain slow and steady growth, iResearch Digital Intelligence may still have slight negative growth, and vertical and OSS business lines may maintain a growth rate of 20% to 25%.

The special dividend payment reflects the company's healthy state of profit and cash flow management and the business philosophy of shareholder returns. The company's business philosophy throughout the year is to carefully expand, reduce costs and increase efficiency to ensure that net profit is at a healthy and reasonable level. Recently, the company announced a special dividend. It will pay a special dividend of HK$0.6 per share. Based on the number of shares of the company (approximately 935.3 million shares), it will pay a dividend of approximately HK$560 million. This special dividend was not distributed in previous years. It explains the company's healthy state of profit and cash flow management and the business philosophy of shareholder returns. Also, according to the company's consistent practice in recent years, an annual dividend will be paid out after the publication of the annual report (the 2022 dividend is about HK$0.4 per share). The relationship between this dividend payment and the annual dividend was not mentioned in this special dividend announcement. Therefore, we believe that there is still a possibility that an annual dividend will be paid twice.

Valuation recommendations: We forecast that the company's 2023-2025 operating income will be 80.89 (-7.0%) /88.24 (-10.3%) /98.87 (-9.8%) billion yuan, respectively. Net profit was RMB 8.85 (-10.7%) /10.08 (-10.7%) /11.56 (-12.2%) billion yuan, respectively, and the net profit CAGR for the 2023-2025 period was 14.3%. Regarding net profit in 2023, since there are special dividend payments, there should be dividend tax costs, which will have a one-time negative impact on annual net profit. We use the method of valuing each business line separately and then adding up the valuation method. Among them, the BSS business uses the PE valuation method, and the other business lines use the PS valuation method. As a traditional telecom business, we gave BSS business 5 times PE (PEG is 0.35, China Telecom's Hong Kong stock PEG is 0.84); DSaaS (i.e., iResearch Digital Intelligence) business, 2 times PS in 2023 (3 times); vertical industries and enterprise cloud (MSP) business, 4 times PS in 2023 (not adjusted); and OSS business, 5 times PS in 2023 (not adjusted). When the four business lines are added together, the target market value is 144.62 (-20.8%) billion yuan, and the target price is RMB 15.46 per share, corresponding to HK$16.89 (-20.3%) per share. (RMB to Hong Kong dollar exchange rate: 0.9155), maintaining the “superior to market” rating.

Risk warning: The basic market of the company's BSS business fell short of expectations, affecting the annual revenue and profit level; the revenue growth rate of the three new businesses fell short of expectations, affecting the valuation level of the company's related business areas and other factors.