On October 25, 2024, the company released its three-quarter report. The first three quarters achieved revenue of 22.45 billion yuan, a year-on-year increase of 0.77%; net profit to mother was 2.545 billion yuan, a year-on-year decrease of 1.74%. Q3 achieved revenue of 7.583 billion yuan, a slight decrease of 0.80% year on year; net profit to mother of 0.735 billion yuan, an increase of 19.75% year on year.

Overseas business is hedging with domestic demand, and the revenue side is generally stable and phased out.

In the third quarter of the single quarter, the main domestic business continued its performance in the first half of the year. Among them, government business stabilized, enterprise business was limited and pressured, distribution business bottomed out, the growth rate of innovative business increased compared to the first half of the year, and overseas business performance was steady.

Gross margin declined, and cost control was relatively good. The gross margins for the first three quarters and the third quarter were 40.81% and 39.90% respectively, down 1.84 pct and 2.37 pct from the previous year, respectively. It is expected to be affected by weak demand in the general environment. The R&D, sales, management, and finance expense ratios for the first three quarters were 13.20%, 15.67%, 3.53%, and -1.08%, respectively. The year-on-year increase was 0.93 pct, 0.29 pct, down 0.35 pct, and 0.31 pct.

Financial products and shares held in the third quarter of the single quarter had a certain return due to the increase in the capital market. Excluding the impact of non-recurring profit and loss, non-net profit deducted from mother in the third quarter of the single quarter was 0.499 billion, a decrease of 22.91% over the previous year.

The domestic market is expected to pick up and improve, and there is potential for deepening cooperation with mobile, etc. In terms of the main domestic business, the cautious situation of government business has changed, and the expected gradual recovery is slowly improving; enterprise business benefits from the rich digital transformation needs of central state-owned enterprises, shifting from public safety to production safety, and penetrating into the core system; distribution business companies continue to increase channel coverage, expand new partners, and build distribution teams. The recovery is pending further recovery in market demand; demand from overseas BRICS countries and the Belt and Road countries continues to rise; demand from overseas BRICS countries and the Belt and Road countries continues to rise; the growth rate of innovative business is growing and there is potential for development. The company and mobile partners work together to polish products. The business implementation has good potential and provides flexibility for business growth.

Profit Forecasts, Valuations, and Ratings

Based on the company's three-quarter report and expectations for future domestic market demand recovery, we adjusted the company's revenue forecast for 2024-2026 to 329.71356.1138.67 billion yuan, up 2.34% 17.99% 18.61% year on year; forecast net profit to mother was 31.9138.914.57 billion yuan, up -56.63% 121.66% 117.64% year on year, corresponding to 17X14X12X PE, maintaining the “buy” rating.

Risk warning

The risk that domestic macroeconomic recovery falls short of expectations; the risk of a tightening geopolitical environment; and the risk of exchange rate fluctuations.