The company's recent situation

On March 11, the company held a “Change · Towards the Future” strategy conference in Shanghai to announce the launch of an intelligent solution strategy, comprehensively showcasing transformative actions such as internal strategic management, functional organization, R&D and sales systems, and software production systems, and showcasing intelligent solutions for AI empowerment, data valuing, and services.

On February 28, the company announced the 2024 equity incentive plan to grant stock options. It plans to grant 32.34 million restricted shares (2.67% of the company's total share capital) to 162 incentive recipients (accounting for 0.94% of the company's total number of employees); the grant price is 8.23 yuan per share.

reviews

Comprehensive transformation shows determination for development, and motivates implementation to help the foundation grow. At the press conference, Dr. Liu Jiren, the founder of the company, shared comprehensive transformation measures including organizational structure, R&D strategy, and sales system. In terms of organizational structure, 4 divisions were reorganized into 11 divisions to make the organizational structure more flat; in terms of sales, 4 major customer departments were abolished and 6 sales regions were reorganized; in terms of management system, the company announced that 1/3 of the cadres will be rotated, 1/3 will be adjusted dynamically, and young cadres will be selected and hired. We believe that as the first software company listed in China, the company has a rich history, and this systematic adjustment shows the company's firm determination to embrace the propositions of the new era. Equity incentives stabilize core talents, and performance goals guide the undertone of development: This time, equity incentives were awarded to 10 directors and executives and 152 core technical leaders. The performance assessment index is the net profit of the main business after restoring the influence of the five innovative business companies and payment of share fees. The target is 42/50/ 60 million yuan or more for 2024/2025/2026.

Embrace new opportunities such as AI+ data elements and open an era of comprehensive intelligent solutions. Focusing on smart cities, healthcare and other business fields, the company released comprehensive intelligent solutions. AI-enabled solutions: The company launched Neusoft Big Language Model System Engineering LLM-SE to promote a wide range of applications in medical care, human society, etc., such as disease diagnosis and digital clinical practice. Data value solutions: The company promotes the application of the Insight Medical Data Intelligence Platform and the Flying Standard Medical Imaging Labeling Platform in medical scenarios such as county-level medical communities to enhance data value discovery. Service-oriented solutions: The company plans to transform the value of software into services, build an information and data management platform for the medical community, and an overall solution to enable the high-quality development of public hospitals. We believe that fully intelligent and upgraded solutions will help the company to embrace new market opportunities such as AI, and look forward to order growth and performance recovery in 2024.

Profit forecasting and valuation

The 2023/2024 profit forecast was lowered by 74.2%/46.8% to 0.80/308 million yuan, taking into account the impact of losses on innovative business subsidiaries in the consolidated statement and calculating long-term equity asset impairment preparations to drag down profits; the 2025 revenue/profit forecast of 140.686/433 million yuan was introduced for the first time. The target price was lowered by 29.3% to 10.60 yuan (valuation switched to 2024 SOTP). There is 19.8% upside compared to the current stock price. The current price corresponds to 34.9/24.8 times the 2024/2025 P/E. Considering the inflection point in the company's performance, it maintained an outperforming industry rating.

risks

Continued losses at innovative business subsidiaries dragged down consolidated profit performance; new order expansion progress fell short of expectations.