Introduction to this report:

Under efficient management, the company's gross margin increased month-on-month, and profit growth in a single quarter returned to key investment points:

The target price was raised to $25.00 to maintain the “Overweight” rating. The performance was in line with expectations, and profit forecasts were maintained. The company's EPS in 2024-2026 was 0.55, 0.66, and 0.77 yuan respectively. Referring to the average of 37.87 times PE of comparable companies in 2025, the target price was raised to 25.00 yuan, and the “gain” rating was maintained.

Results were in line with expectations, and Q3 profits returned to growth. In the first three quarters of 2024, the company achieved revenue of 3.436 billion yuan, up 10.05% year on year, and achieved revenue of 1.192 billion yuan in a single quarter in Q3, up 8.47% year on year. The revenue growth rate was in line with expectations. Net profit to mother was 0.226 billion yuan in the first three quarters, down 9.34% year on year. The decline was narrower than in the first half of the year. Among them, net profit for the single quarter was 0.106 billion yuan, an increase of 7.15% over the previous year, and profit returned to the growth trajectory in the single quarter.

Increased gross margin is the key to stopping the decline and stabilizing performance. In 2024, the growth rate of IT spending in the banking industry, especially major state-owned banks, slowed. Coupled with credit innovation, the difficulty of implementing projects increased, and industry competition intensified, leading to continued pressure on the overall gross margin of the industry. By improving the quality of internal operations, the company successfully reversed the trend of continuous decline in gross margin in a downstream environment. However, the gross profit margin for the third quarter was 24.59%, up 2.40 pcts month-on-month, and became the main driving force behind the increase in net interest rate of 2.53 pcts month-on-month.

The industry's profit margin has basically bottomed out, and the company is expected to lead the industry's profit recovery. In the current industry environment, participating companies will more adopt relatively conservative business strategies, and competition will ease somewhat. All companies on the cost side are taking corresponding control measures, so we judge that the gross margin of the industry has basically bottomed out. As an industry leader with excellent management capabilities, the company took the lead in reversing the gross margin trend in Q3. In the future, profit margins are expected to increase quarterly and return to a normal range.

Risk warning: Fiscal investment has declined more than expected, labor costs have risen, and policy risks.