Investment events: Recently, the company released its report for the third quarter of 2024. In the first three quarters of 2024, the company's revenue reached 1.035 billion yuan, down 12.05% year on year; net profit reached 0.004 billion yuan, up 145.85% year on year; net profit to mother was 0.004 billion yuan, up 142.75% year on year.

Revenue is under pressure in the short term and is expected to pick up in the future. In the first three quarters of 2024, the company's revenue reached 1.035 billion yuan, a year-on-year decrease of 12.05%; in the third quarter of 2024, the company's revenue was 0.331 billion yuan, a year-on-year decrease of 22.66%. We believe it may be affected by delays in the delivery and acceptance of some projects, causing short-term fluctuations in revenue. In the first three quarters of 2024, the company's inventory reached 0.778 billion yuan, a change of +92.82% from January 1, 2024, mainly due to an increase in investment in uninspected projects. With the gradual acceptance of projects, the company's revenue performance is expected to pick up.

The gross margin increased significantly, and the cost side was steady. In the first three quarters of 2024, the company's gross margin was 35.11%, up 0.96% from the same period last year. From the cost side, in the first three quarters of 2024, the company's sales/management/R&D expenses ratio was 8.97%/15.68%/8.58%, respectively, maintaining a steady trend overall.

A strategic cooperation was reached with HUAWEI CLOUD and continued to win bids in the AMC field. In September 2024, the company officially reached a strategic cooperation with HUAWEI CLOUD. The two sides will form joint efforts in technology platforms, core modernization joint solutions for financial hosting, technological innovation and continuous service, market expansion, and talent training and technical support to actively build a benchmark project combining core banking systems with cloud-native platforms. At the same time, in the AMC field, the company has won the favor of five AMC companies in a row during this year, further demonstrating the company's high market recognition and leading position in the field of AMC's non-performing asset management.

Investment suggestions: Due to reasons such as company growth and equity incentives, and in line with the company's development trend in the financial IT field, we adjusted the profit forecast and predicted that the company's 2024-2026 revenue would be 2.23/2.645/3.193 billion yuan, respectively, and net profit to mother would be 0.1/0.144/0.191 billion yuan (the original value was 0.094/0.131/0.177 billion yuan), and the corresponding PE was 137/95/71 times, respectively, maintaining the “buy” rating.

Risk warning: Business development falls short of expectations, slow policy progress, untimely data updates, etc.