Revenue grew steadily, and cash flow improved year over year. The company discloses its 2023 annual report. In 2023, the company achieved revenue of 1,347 billion yuan, a year-on-year increase of 5.01%; net profit to mother of 168 million yuan, a year-on-year decrease of 8.83%; and net operating cash flow of 188 million yuan, an increase of 401.38% over the previous year. Q4 revenue was 543 million yuan, down 12.70% year on year; net profit to mother was 54 million yuan, down 9.13% year on year. In 2023, the company's project implementation and acceptance cycle was extended, project implementation costs increased, operating income increased slightly year-on-year, net profit declined slightly year-on-year, and net operating cash flow improved significantly. The company's gross sales margin was 47.61% in 2023, 55.24% in 2022, a decrease of 7.63pct; the sales expense ratio was 12.57%, a decrease of 0.86pct; the management expense ratio was 9.00%, a decrease of 0.84pct; and the R&D expense ratio was 11.31%, a decrease of 2.24pct.

Healthcare and smart city businesses contributed to revenue growth. By business, the medical insurance business revenue was 707 million yuan, an increase of 15.07% over the previous year, accounting for 52.49% of revenue; the gross profit margin was 45.20%, a decrease of 12.66 pcts.

Digital government business revenue was 550 million yuan, down 7.48% year on year, accounting for 40.85% of revenue; gross profit margin was 49.37%, a decrease of 3.65 pcts. Smart city business revenue was 68 million yuan, up 62.81% year on year, accounting for 5.06% of revenue.

Develop a medical insurance data zone to help value data elements. The company fully supports the operation and maintenance of health insurance information platforms in 23 provinces across the country to ensure the stable and efficient operation of the platforms. According to the requirements of the National Health Insurance Administration for “combining two and three empowering”, the company actively carries out the construction of health insurance data zones, and actively carries out capitalization, commercialization, and service innovation of health insurance data elements to enable health insurance management, health insurance reform, and medical insurance services. The company's “Hospital Disease Diagnosis and Treatment Path Knowledge Base and Medical Expense Analysis System” was listed as the first batch of data capabilities on the Guangzhou Data Exchange, making the value of data elements a new impetus for “integration of numbers and reality”. The company implemented the construction of data zones in various cities in Sichuan, undertook data center optimization and data governance in Sichuan and Yunnan provinces, developed more than 20 health insurance industry algorithm models, and implemented pilot applications in Tianjin, Sichuan, Yunnan, Guizhou, Shanxi, Shaanxi and other provinces and cities.

“Expand and strengthen smart cities” and integrate into the construction of new smart cities. Focusing on the core strategy of “expanding and strengthening smart cities”, the company actively integrates into the new smart city construction circuit, digitally links social governance and urban services, builds a city-level core platform, enhances urban resilience, and enhances people's livelihood and welfare. During the reporting period, the company continued to expand the smart Rongcheng market share, set a new benchmark for “One Network Management” city operation, and built a “Digital China” leading exemplary project in the Digital Chongqing Cornerstone Project. Furthermore, through the development of a series of data element products such as credit files, economic portraits, corporate credit scores, easy credit, and industrial chain risk assessments, the company uses application scenarios to unlock the value of data elements, laying a solid foundation for the company to become an excellent supplier in the field of data element segmentation. At the same time, through the construction of projects such as the smart Rongcheng “digital base” and “citizen code”, a general entrance for urban services has been built, and “multi-code integration, free licensing, and one-code access to the city” has been achieved.

Profit forecasting and investment advice. We believe that the company is a leading enterprise in smart people's livelihood, and is in a leading position in the industry in information technology fields such as healthcare, medical security, human society, housing provident funds, and civil affairs. As the country vigorously promotes the development of the digital economy and data element policies are implemented one after another, the company is expected to usher in breakthroughs and expansion of business opportunities. Under the leadership of expanding and strengthening the “healthcare+smart city” dual-industry core strategy, we expect the company's 2024-2026 revenue to be 15.50/18.172/2,172 billion yuan, respectively, up 15.1%/17.2%/19.5% year on year; net profit to mother is 2.10/2.644/341 million yuan, up 24.8%/29.3% year on year; EPS 0.51/0.65/0.84 yuan, respectively. We used both PE and PS methods to value the company.

(1) PE valuation method: Refer to comparable company PE. Considering the company's long-term accumulation in medical insurance, social and civil affairs, etc., and the development stage of digital economy construction, the company is given 45-50 times the dynamic PE in 2024, with a reasonable value range of 22.95-25.50 yuan.

(2) PS valuation method: Refer to the PS of comparable companies. Considering the company's long-term accumulation in medical insurance, social and civil affairs, etc., and the development stage of digital economy construction, the company is given 6-7 times the dynamic PS in 2024, with a reasonable value range of 22.79-26.58 yuan.

In summary, combining PE and PS valuation methods, the reasonable value range for Jiuyuan Yinhai is 22.95 to 25.50 yuan, maintaining a “superior to the market” rating.

Risk warning. Policy progress falls short of expectations; demand for informatization falls short of expectations; market competition intensifies.