Zhongke Jiangnan achieved revenue of 0.493 billion yuan (yoy -36.83%), net profit of 6.7762 million yuan (yoy -96.39%), deducted non-net profit of 4.5102 million yuan (yoy -97.46%), and deducted non-net profit of 61.0574 million yuan (yoy -72.34%) after excluding shares. As one of the direct beneficiaries of “financial bonds,” the company can expect flexible performance next year and maintain purchases.

Report Focus 1: The 24Q3 Single Quarter Profit Statement Further Deterived

The company achieved revenue of 0.13 billion yuan (yoy -59.48%) and net profit of -26.238 million yuan (yoy -131.97%) in 24Q3, which deteriorated further compared to 24H1 (24H1 revenue yoy -21.13%, net profit to mother yoy -68.78%). The main reason was that the tight G-side budget situation in the third quarter had not abated significantly. Although bidding for some projects started, the revenue side was not yet confirmed. The company's gross margin for the first three quarters was 56.80%, a year-on-year change of +0.28pct; due to the large decline in the company's revenue in the first three quarters, the period/sales/management/R&D expenses ratio yoy+26.06pct/+7.27pct/+3.78pct/+17.00pct, to 58.6%/17.61%/8.70%/37.40%, respectively.

Report focus 2:24Q3 operating cash flow improved significantly year-on-year in a single quarter. The marginal improvement indicators worth paying attention to in the report are mainly operating cash flow. Cash received by the company from sales of goods and services in the first three quarters increased 0.66% year over year, and net operating cash flow was -0.205 billion yuan, or -70.24% year over year. In Q3, the company's cash received from sales of goods and services increased 16.43% year over year, and net operating cash flow increased 96.48% year over year. On the one hand, thanks to the company's further strengthening of repayment management, on the other hand, bidding for Q3 projects accelerated month-on-month compared to Q2, and cash inflows accelerated.

Zhongke Jiangnan: One of the direct beneficiaries of local finance “debt conversion”. Next year's flexible performance is expected. Financial IT is one of the “damaged” areas on the G-side because its downstream customers are the central financial department and various local financial departments, and it has the characteristics of being the last to suffer and benefit first. Due to the introduction and implementation of the central government's various fiscal policies, they all require corresponding information system support, such as integrated budget management, financial operation monitoring, transfer payment systems, etc., which are rigid requirements of the financial department. Therefore, with the introduction of fiscal policies and the improvement of local financial payment capacity, local finance digitization and intelligence projects are expected to accelerate. Looking ahead to next year, businesses such as budget integration 2.0, digital finance, comprehensive promotion of electronic accounting documents, health insurance fund payments, and electronic health insurance vouchers are all expected to become important driving forces for the rapid growth of Zhongke Jiangnan's performance.

Profit forecasting and valuation

In view of the further decline in the company's 24Q3 revenue and net profit due, the company's 24-26 EPS was reduced to 0.57, 0.92, and 1.33 yuan, respectively (previous values were 0.76, 1.01, and 1.35 yuan). Considering that the company's 2025 performance returned to high growth, we used the 2025 estimate, which is 33 times (Wind). Since the company's 24-26EPS compound growth rate (52.29%) is higher than the comparable company average (26.27%), the company was given a 2025 target PE 45 times, corresponding to a target price of 41.25 yuan (previous value of 21.18 yuan).

Risk warning: Risks such as falling short of expectations in fiscal policy and intensifying market competition.