Event: The company released the 2023 and 2024 quarterly performance reports.

2023: Revenue of 2.254 billion yuan, -0.75% YoY. Net profit attributable to mother was 0.254 billion yuan, +1.98% YoY; after deducting non-net profit 0.186 billion yuan, -17.27% YoY.

2024Q1: Operating income of 0.54 billion yuan, +4.51% year on year; net profit to mother was 20.38 million yuan, +216.45% year over year, net profit of not attributable to mother was 18.15 million yuan. Over the same period, +194.39% intelligent manufacturing revenue grew steadily, and customer development results were remarkable. 1) Affected by the slowdown in digital investment from individual major customers and the slowdown in the pace of acceptance confirmation of some projects, the revenue growth rate in '23 was under pressure. Among them, the Pan-ERP business achieved revenue of 1.219 billion yuan, or -1.70% year-on-year. The gross margin was 31.92%, -0.78pct year on year. The main reason for the decline in revenue was the largest customer revenue; the intelligent manufacturing sector achieved revenue of 0.83 billion yuan, +2.56% over the same period last year. Gross margin was 43.16%, +0.01pct year over year.

2) The company's self-developed product licensing revenue exceeds 0.13 billion, and its share of the company's revenue is increasing year by year. Self-developed products are gradually being recognized, which is expected to steadily increase the company's gross margin. 3) In terms of sales and marketing, the company's annual orders increased 8.7% year on year, and the number of new customers exceeded 230, accounting for 21.66% of the total number of customers, laying a good foundation for continued market expansion in subsequent years.

Actively seize the opportunities of localization and intelligence, and launch new products to continuously improve competitiveness. 1) Pan-ERP field: The company focuses on developing the central state-owned enterprise market. The self-developed platform successfully replaced some mainstream ERP application modules of central enterprises abroad, and was switched online on a large scale during the year; released the AIGC platform, a major manufacturing service model, and became one of the first partners of Huawei's Pangu Big Model. 2) Intelligent manufacturing field: The company's industrial Internet platform was selected for the Ministry of Industry and Information Technology's “Double Cross” platform list. New MBM products will be released during the year to achieve collaboration between supply chain planning and logistics, and integrate energy management with equipment asset management. At the same time, the company is actively cooperating with Huawei to jointly develop a next-generation SMOM joint solution based on Huawei IDMe to help enterprises upgrade intelligent manufacturing.

Revenue picked up in 24Q1, and the results of cost reduction and efficiency were remarkable. The 24Q1 company's revenue increased 4.51% year over year, but considering the Snoop merger, it is judged that the revenue side is still under pressure. However, the company actively reduced costs and increased efficiency. The 24Q1 gross margin increased by 1.83 pct year on year, and the sales/management/R&D expenses ratio decreased by 0.79/0.68/5.01 pct year on year, respectively. It is expected that cost reduction and efficiency will continue throughout 24 years.

As the downstream boom gradually recovers and the company's operating efficiency increases, performance is expected to improve quarter by quarter.

Investment advice: The company is expected to achieve revenue of 2.62/3.145/3.771 billion yuan in 2024-2026, achieve net profit to mother of 0.308/0.382/0.476 billion yuan, and maintain a “buy” rating.

Risk warning: Downstream prosperity falls short of expectations, technology research and development falls short of expectations, and market competition intensifies.