Introduction to this report:

The impact of integration on revenue is expected. In the future, we should pay more attention to profit quality rather than apparent revenue investment points

Maintain the target price of 19.26 yuan and maintain the “Overweight” rating. Maintaining the profit forecast, EPS for 2024-2026 was 0.53, 0.70, and 0.81 yuan, respectively. Maintain the target price of 19.26 yuan and “increase your holdings”.

Revenue declined due to integrated business, but was in line with expectations. In the first quarter of 2024, the company achieved operating income of 601 million yuan, a year-on-year decrease of 24.25%, and realized net profit to mother of 32.11,900 yuan, a year-on-year decrease of 23.29%. The main reason for the decline in revenue was the decline in the integrated business. In the previous report, we also analyzed that the company's integrated business revenue continued to be low, so although the performance declined, it was still within expectations.

Profitability recovered, and net profit after deducting non-deductible equity incentives increased year over year. The company's gross margin increased sharply by 4.39 pct year-on-year during the reporting period. One reason was the change in the company's revenue structure, and the share of integrated businesses with low gross profit declined. Another reason is that the gross margin of the software development business has rebounded by 1.5pct. It is expected that subsequent companies will pay more attention to quality rather than quantity in their operations, and the profitability of the software business is expected to pick up further, thus continuing to drive the company's profitability upward. Affected by this, the company's net profit after deducting non-recurring profit and loss and equity incentives increased 26.89% year-on-year during the reporting period.

Continuously promote cost reduction and efficiency, and it is recommended to focus on profit rather than revenue. The impact of the integrated business on the company's revenue side may expand throughout the year and not just Q1, so it is expected that the company's apparent revenue will be affected in the next few quarters. However, the gross margins of the software business and operating business have all rebounded. Combined with the company's internal cost reduction and efficiency and continued strength in overseas high-margin markets, it is expected that the profit growth rate will continue to outperform the revenue growth rate in the future, and more attention should be paid to the profit side rather than the revenue side

Risk warning: policy risk, bank spending cuts drastically, overseas business progress falls short of expectations