Introduction to this report:
The number of company personnel has declined, costs have been controlled, and profit margins have been significantly restored. In the future, we will focus on platform upgrades and value-added service markets in the field of government procurement.
Key points of investment:
The target price was lowered by 26.03 yuan to maintain the “gain” rating. The company's fee control results have been remarkable. The inflection point of Q2 profit has been raised, and the profit forecast for 2024-2026 has been raised. The company's 2024-2026 EPS is expected to be 0.73 (+0.25), 0.88 (+0.29), and 0.97 (+0.33) yuan, respectively. Considering the temporary distortion of the company's net interest rate, the target price was lowered to 26.03 yuan by referring to 3.92 times the PS of the comparable company in 2024, maintaining the “gain” rating.
Fee control has achieved remarkable results, and the inflection point in Q2 profit has already been reached. In the first half of 2024, the company achieved revenue of 0.784 billion yuan, a year-on-year decrease of 14.00%. Q2 achieved revenue of 0.49 billion yuan in a single quarter, a year-on-year decrease of 13.44%, in line with expectations. The company lost 23.6654 million yuan in net profit to mother in the first half of the year, but in Q2, it achieved net profit of 28.9792 million yuan in a single quarter, a significant increase of 1453.72% over the same period last year. In the first half of the year, the number of company personnel decreased by 8.75% to 6542. All three fees declined to varying degrees. Fee control results were remarkable, and profits for the single quarter slightly exceeded expectations.
Revenue from the construction business continued to decline, and the platform operation business returned to growth. Affected by the financial budget and macroeconomic environment, 2024H1's project construction business achieved revenue of 0.186 billion yuan, a year-on-year decrease of 15%, and the smart government business achieved revenue of 0.292 billion yuan, a year-on-year decrease of 26%. The company's self-operated “Xindian Electronic Trading Platform” added 65 new zones in the first half of the year. The number of zones increased by 54.76% year-on-year, hedging the decline in business volume through increased penetration.
Affected by this, 2024H1's platform operating business achieved revenue of 0.172 billion yuan, an increase of 8.6% over the previous year.
The government procurement sector has ushered in a new order, and recruitment information technology companies are expected to fully benefit. On July 4, 2024, the General Office of the State Council issued a notice on the “Three-Year Action Plan for Rectifying Market Order, Establishing Regulatory Systems, and Promoting Industrial Development” in the field of government procurement (2024-2026). The “Notice” proposes that work efficiency should be improved through innovative supervision methods, and that the central government's electronic procurement platform should be upgraded. In the short term, the unified construction of the recruitment system is expected to usher in a new round of system updates and construction cycles, and the company, as the leader of the recruitment system, is expected to fully benefit.
In the long run, the “Notice” mentions providing “government procurement loans” to small and medium-sized enterprises to further support the development of small and medium-sized enterprises. The company serves a wide range of bidding companies through the form of value-added services for platform operations, and there is plenty of room for future growth.
Risk warning: Fiscal investment has declined more than expected, labor costs have risen, policy risks