Investment events: Recently, the company released its report for the first quarter of 2024. In Q1 2024, the company achieved operating income of 12.
8.7 billion yuan, up 0.91% year on year; net profit to mother was 0.26 million yuan, up 12.35% year on year; net profit after deducting non-return to mother was 0.24 billion yuan, up 48.82% year on year.
Revenue has maintained steady growth, and profitability has improved significantly. In Q1 2024, the company achieved operating income of 1,287 million yuan, a year-on-year increase of 0.91%; net profit to mother of 0.26 million yuan, an increase of 12.35% over the previous year; net profit after deducting non-return to mother was 0.24 million yuan, an increase of 48.82% year-on-year. The main reason for the significant increase in profit side is due to increased customer stickiness and increased profitability due to improved management standards. The company emphasizes the “similar reuse” development model, establishes an industry reference model, and continuously forms competitive barriers at the level of data architecture, system groups/function set/user experience, and component platform/script specifications. On the one hand, it empowers customer business development and enhances the company's customer stickiness through rapid response mechanisms. On the other hand, under the reference model, it has accumulated experience in sample programs, technical documents, knowledge maps, etc., to ensure that young developers can quickly learn and use it, so that software development efficiency is continuously improved.
Expenses are well controlled and cash flow is improving. The company's cost side has good control. In Q1 of 2024, the company's sales/management/R&D expenses rates were 6.02%/1.73%/20.01%, respectively. Among them, sales/R&D expenses decreased by 0.93%/2.31%, respectively, compared with the same period last year. In Q1 2024, the net cash flow from the company's operating activities was -632 million yuan, compared to -929 million yuan in the same period last year. The main reason for the improvement in cash flow was an increase in cash received from sales of goods and provision of services, and a decrease in cash paid to employees for the purchase of goods, acceptance of labor, and payment to employees.
Overseas business is expected to drive the company's continued high-quality development. In 2023, the company achieved business revenue of 235 million yuan for customers outside the mainland, an increase of 15.41% over the previous year. The company mainly provides insurance IT services in overseas markets. Customers include overseas branches of Chinese insurance companies, local insurance institutions, local branches of multinational insurance institutions, etc. The company's overseas business continues to expand. By building benchmark projects for local customers outside of mainland China, it is expected to inject momentum into the company's development in the future.
Investment advice: Forecast that the company's revenue for 2024-2026 will be 68.58/73.43/8.027 billion yuan, and net profit to mother will be 7.20/8.32/987 million yuan, respectively. The corresponding PE is 22/19/16 times, respectively, maintaining the “buy” rating.
Risk warning events: business development falls short of expectations, slow policy progress, untimely data updates, etc.