Brief performance review

On October 25, 2024, the company released its three-quarter report. The first three quarters achieved revenue of 1.26 billion yuan, a year-on-year decrease of 8.7%; net profit to mother was -13.889 million yuan, compared to -88.922 million yuan in the same period last year, and losses narrowed markedly. Q3 achieved revenue of 0.47 billion yuan, a year-on-year increase of 1.6%; achieved net profit of 9.777 million yuan to mother, turning a year-on-year loss into a profit.

Management analysis

The company continued to reduce costs and increase efficiency. The total costs and fees for the first three quarters decreased by 13.7% year-on-year. The gross margin of the Q3 company was 60.2%, a slight decrease of 0.8 pct from the previous year; the sales/management/ R&D expenses ratio was 26.4%/8.0%/23.2%, with a year-on-year change of +0.2pct/-1.9pct/-3.2pct, mainly due to the company's continuous strengthening of budget cost control through digital means combined with performance evaluation and management.

In terms of data elements, the Changsha Municipal Affairs Data Authorization and Operation Platform constructed by the company has been officially launched to create personal health files and illustrate 16 types of government data operation scenarios, including Changsha, smart commercial site selection, and digital finance in Changsha. The company is also working with Zhangjiagang Mathematics and Zhangjiagang Agricultural Commercial Bank to build a “public data+inclusive finance” application innovation laboratory to promote the construction of data governance, authorized operation platforms, and private computing platforms. The company signed a strategic cooperation agreement with HUAWEI CLOUD to collaborate deeply in the fields of data governance and smart government.

Profit forecasting

Based on the company's three-quarter report and expectations for a recovery in demand on the G-side and the B-side, we raised the company's revenue forecast for 2024-2026 to 2.36/2.75/3.22 billion yuan, up -3.2%/16.5%/17.0% year on year; the projected net profit to mother was 0.26/0.36/0.45 billion yuan, up 33.9%/37.9%/24.8% year on year, corresponding to 43.3x/31.4x/25.1x PE, maintaining a “buy” rating.

Risk warning

Government clients' investment in informatization fell short of expectations, procurement and operation business growth fell short of expectations, market competition intensified, and accounts receivable and inventory risks were high.