Investment events: Recently, the company released its 2023 annual report and 2024 quarterly report: (1) In 2023, the company achieved operating income of 1,918 billion yuan, an increase of 1.62% over the previous year; net profit to mother was 32 million yuan, an increase of 42.98% over the previous year. (2) In Q1 2024, the company's revenue was 289 million yuan, a year-on-year decrease of 2.49%; net profit to mother was 0.4 billion yuan, an increase of 34 million yuan over the previous year.

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The core business system has sufficient orders and a wide range of customers. In 2023, the company achieved revenue of 1.918 billion yuan, up 1.62% year on year, of which digital finance business solutions achieved revenue of 1,149 billion yuan, up 3.82% year on year; big data application system solutions achieved revenue of 6.2 billion yuan, down 2.87% year on year; and comprehensive value management solutions achieved revenue of 149 million yuan, up 4.64% year on year. Bank core business solutions are the company's main market-leading products. In 2023, the company obtained contracts for the construction of core business systems from more than 10 banks, surpassing the best level in previous history. In terms of customer coverage, in 2023, the company cooperated with 3 policy banks, 6 large state-owned commercial banks, and all national joint stock banks, and the coverage rate for all customers with assets of 500 billion or more was over 96%.

Gross profit margin has stopped falling and stabilized, and is expected to continue to rise in the future. In 2023, the company's overall gross margin level stopped falling and stabilized, rising slightly from 33.57% in the same period last year to 34.00% in the current period. The main reason is that the measures taken by the company to reduce costs and increase efficiency had a certain effect, and the impact of the three-year epidemic on the project gradually declined. In Q1 2024, the company's gross margin reached 36.09%, up 0.11% year-on-year. The company will focus on project selection, improving R&D and delivery efficiency, strengthening R&D investment and horizontal technology integration for key products, and further improving the level of gross margin in international research and development of key domestic products.

It has vigorously expanded overseas markets and is well recognized by customers. After years of hard work, the company gradually developed its own brand awareness in Southeast Asia. In 2023, for the first time, the company helped a bank customer in the Philippines successfully launch a loan module with a 35-day historical record; it won a bid for a Thai bank's downsizing and new core system construction with a historically high contract amount.

The company has accumulated rich experience in overseas market development, product development, project delivery, localized operation, and cultural integration. As overseas projects continue to be implemented, it is expected to set a model for the Southeast Asian market and usher in new historical opportunities.

Investment advice: According to the annual report issued by the company, considering the macroeconomic impact, some banks' investment in fintech has slowed. We have adjusted 2024 and 2025, and added profit forecasts for 2026. We forecast the company's revenue for 2024-2026 to be 22.30/26.45/3.193 billion yuan, respectively (27.65/33 for 2024-2025, respectively).

2.4 billion yuan), net profit attributable to mother was 0.94 billion 1.31 billion yuan (2024-2025, respectively, 2.06/293 million yuan), corresponding PE was 57/41/30 times, respectively, maintaining the “buy” rating.

Risk warning events: business development falls short of expectations, slow policy progress, untimely data updates, etc.