Investment events: Recently, the company released its 2023 annual report and 2024 quarterly report: 1) In 2023, the company achieved operating income of 1.936 billion yuan, a year-on-year decrease of 2.01%; realized net profit of 117 million yuan, an increase of 91.94% over the previous year; realized net profit withheld from non-mother of 64 million yuan, an increase of 286.76% over the previous year. 2) In the first quarter of 2024, the company achieved operating income 4.

Net profit of 8.8 billion yuan, up 1.36% year on year; realized net profit of 91 million yuan, up 225.81% year on year; realized net profit deducted from non-mother was 44 million yuan, up 61.74% year on year.

Revenue was under slight pressure due to multiple factors, and domestic and international orders continued to break through. In 2023, the company achieved revenue of 1.936 billion yuan, a year-on-year decrease of 2.01%. The main reason was, on the one hand, the company's strategy adjustments, focused on high-quality development of strategic customers and core businesses, and optimized the business structure; on the other hand, the settlement cycle for major projects of individual major customers was long, and project delivery, acceptance and settlement were delayed due to a combination of reasons. By business, in the credit card sector, the CreditX credit card product independently developed by the company won the bid of an overseas Indonesian bank and a Chinese subsidiary in Hong Kong in 2023, opening up markets in Hong Kong, Macao, Taiwan, and Southeast Asia; the consumer finance product Cosulo signed contracts with 2 consumer finance companies. In the field of credit management, the number of clients for credit-related projects increased by more than 18 in 2023, including 5 new large-scale comprehensive credit projects.

Profits grew strongly, and net operating cash flow improved markedly. In 2023, the company achieved net profit of 117 million yuan, a year-on-year increase of 91.94%; realized net profit withheld from non-mother of 64 million yuan, an increase of 286.76% over the previous year. The main reasons are: 1) the company focuses on strategic customers to improve the quality of project delivery, 2) strengthens accounts receivable management and increases the clean-up of long-standing accounts receivable, and 3) government subsidies and financial management benefits have a positive impact on profits. The net cash flow from the company's operating activities in 2023 was 406 million yuan, a clear improvement over the past, and the implementation of the company's strategy of focusing on the quality of growth was reflected.

Lay out large model application solutions to increase investment in computing power. Seizing AI opportunities, the company will provide comprehensive large-scale model application solutions to commercial banks and other financial institutions. In response to complex situations such as a shortage of computing power supply and the integration of heterogeneous computing power from multiple vendors, the company has cooperated with Capital Online, Hunan University, and the National Supercomputing Center in Changsha to lay out the construction of computing power, and will increase investment in large-scale computing power deployment in the future.

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. The company's revenue for 2024-2026 is estimated to be $2,133/23.76/2,672 billion yuan (2024-2025, respectively), net profit to mother of 1.41/1.73 billion yuan ($179/241 million yuan in 2024-2025, respectively), and corresponding PE is 37/30/24 times, respectively, maintaining a “buy” rating.

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