Incident Overview
Zhongke Jiangnan released its report for the first quarter of 2024 on April 25. In 2024, Q1 achieved revenue of 132 million yuan, a year-on-year increase of 19.36%; realized net profit of -14 million yuan, a year-on-year decrease of 211.54%; and realized net profit without deduction of -14 million yuan, a year-on-year decrease of 255.52%. From the beginning of the year to the end of the reporting period, the company confirmed the share payment fee of 225.02 million yuan. Excluding share payments, net profit not attributable to mother was RMB 5.921,100, a year-on-year decrease of 35.33%.
Revenue is in line with expectations, and the calculation of equity incentives and staff increases affect short-term profit1) In terms of revenue, the company achieved revenue of 132 million yuan in Q1 in 2024, an increase of 19.36% over the previous year.
2) In terms of profit, 2024Q1 achieved net profit of -14 million yuan, a year-on-year decrease of 211.54%, mainly due to the inclusion of equity incentive expenses for the entire quarter compared to the same period last year. Compared with the same period last year, the number of employees in the company increased by more than 100 people during the same period, and related expenses also increased accordingly.
3) In terms of gross margin, 2024Q1's gross margin was 56.65%, a year-on-year decrease of 3.26pct.
4) In terms of cost ratio, the 2024Q1 sales expense ratio was 20.7%, up 6.61 pct year on year; the management cost rate was 10.6%, up 3.19 pct year on year; the R&D cost rate was 46.08%, up 7.13 pcts year on year; the cost increase was mainly due to the share incentive expenses for the entire quarter compared to the same period last year, and the increase in personnel and related expenses compared to the same period last year. The financial expense ratio was -7.73%, a year-on-year decrease of 1.4 pct, mainly due to an increase in interest income.
5) In terms of cash flow, the net cash flow from 2024Q1's operating activities was -195 million yuan, a year-on-year decrease of 119.34%. This was mainly due to a decrease in sales payments and an increase in cash paid for goods and labor payments in the current period compared to the same period last year.
Traditional businesses build up the company's basic market, and new business growth can be expected
1) In terms of traditional business, the electronic payment business and integrated budget management business form the basic market of the company.
According to incomplete statistics, the company's electronic payment products and services have covered 33 provincial, 455 prefecture-level and city-level financial units; integrated budget management has participated in benchmarking and upgrading work in 12 provinces; and the accounting cloud platform has covered more than 170,000 budget units.
2) In terms of new business, the company's electronic products in the industry continue to expand into various fields such as medical insurance, electronic vouchers, and digital yuan. In the field of health insurance, the National Health Insurance Administration's electronic bill application blockchain platform and electronic bill sharing project has completed the construction of the National Administration's main node and 28 sub-nodes, and nearly 3,000 medical institutions have been launched. In addition, based on the “Health Insurance Data Security Application Platform”, a public data product for the health insurance sector in Guangdong Province, “Qingyi Insurance (Health Insurance Claim)”, which was created by Zhongke Jiangnan in cooperation with Qingyuan Digital Investment and Operation Co., Ltd. was also listed on the Guangzhou Data Exchange in February this year. In terms of electronic accounting documents, the company is one of the distribution platforms and service guarantee units designated for the pilot work to deepen electronic certificate accounting data standards. By the end of 2023, the company's integrated electronic certificate service application platform had been promoted in 14 provinces and cities across the country, providing service guarantees for 646 accounting entities.
In the future, the company will continue to stabilize the electronic payment infrastructure, make every effort to develop an integrated budget management market based on a digital financial framework, actively open up market space for emerging business scenarios such as electronic accounting documents, medical insurance, and trademark informatization, and play the “data factor ×” multiplier effect.
Investment advice
We expect the company to achieve revenue of 15.1/19.5/25.0 in 2024-2026, respectively (previous value:
15.1/19.5/25.0) billion yuan, up 25%/29%/28% year on year (previous value: 25%/29%/28%); realized net profit to mother of 3.7/4.8/6.2 (previous value: 3.7/4.9/6.3) billion yuan, up 25%/29% year on year (previous value: 25%/30%/30%), maintaining the “buy” rating.
Risk warning
1) R&D breakthroughs fall short of expectations; 2) Policy support falls short of expectations; 3) Product delivery falls short of expectations.