Core views:

The company disclosed its quarterly report for '23. Revenue for the first three quarters was 1,888 billion yuan, -3% year over year; net profit to mother was 14.42 million yuan, +27% year over year; net profit after deducting non-net profit was 5.21 million yuan, +125% year over year.

Revenue growth turned positive in Q3, and good performance is expected to continue in Q4. 1.Q3 revenue growth in a single quarter turned positive (+2.44%). The previous 8 quarters had negative revenue growth. Overall, although restoration efforts are still weak, they should already be on track. 2. With the external macroeconomic bottom up, especially the gradual recovery of the hotel and restaurant industry, the company's Q4 revenue is expected to continue Q3 performance and reverse the negative annual revenue growth trend since 2020.

Internal management was optimized, and the Q3 cost rate decreased significantly. In Q3, the three expense ratios (R&D+management+sales) in a single quarter were about 49.19%, down 3.73 PCT from month to month, and 4.78 PCT from year to year. Combined with the analysis of “payments to employees and cash payments to employees”, the company should have carried out internal management optimization, and achieved obvious results.

Currently, the core focus is still on the new signing and launch of SEP and Infrasys Cloud. The company did not disclose the latest launch data in the three-quarter report. However, judging from the data previously reported, and considering the recent overall recovery in the hotel industry, the launch of SEP and Infrasys Cloud is still progressing in an orderly manner. As we have emphasized before, the company's core focus and potential value increase was still the promotion of its high-end hotel information technology business on the same day, that is, the continued signing and launch of SEP and Infrasys Cloud.

Profit forecasting and investment advice. It is estimated that in 23-25, the company's total revenue will be 2,604 billion yuan, 2,823 billion yuan, and 3.309 billion yuan, respectively. Referring to the latest valuation of comparable companies, we gave the company a valuation multiplier of 16X PS, which corresponds to a reasonable value of about 15.26 yuan/share based on the expected revenue for 23 years, maintaining a “buy” rating.

Risk warning. Uncertainty about the pace of procurement and launch of new products by high-end hotel groups; uncertainty about the impact of geopolitics on the final share of SEP; risk of impairment of goodwill.