The company released its 24Q3 quarterly report. 24Q1-Q3 achieved revenue of 82.85 million yuan, +58% year over year; net profit to mother of -70.65 million yuan; of these, 24Q3 achieved revenue of 31.1 million yuan, +1% year over year; net profit to mother of -4.22 million yuan. Overall in line with market expectations

There is a large quarterly difference in revenue, and the year-round growth rate is optimistic. Previously, the company's revenue in the first three quarters accounted for a low proportion of annual revenue (23Q1-Q3 accounted for less than 20% of annual revenue in '23), and the low absolute value was greatly affected by single orders. The phased slowdown in Q3 was mainly affected by the pace of order confirmation, and the annual growth rate is still optimistic.

Operational repayments have been accelerated, and the quality of operations has improved. According to the announcement, the company received 0.15 billion yuan in cash from sales of goods and provision of labor services in 24Q1-Q3; net operating cash flow was -87.12 million yuan, compared to -98.05 million yuan in the same period last year. Against the backdrop of accelerated revenue, the quality of operations improved markedly.

It has advantages in capital and resources, and is expected to become an integrator in the CAE industry. According to the announcement, the company reported that the monetary cash at the end of the reporting period was about 2 billion yuan. Previously, cooperating units for scientific research projects were at a high level. Referring to the growth history of overseas giants, mergers and acquisitions are an important path for industrial software development, and the company is expected to replicate the merger and acquisition path and continue to catalyze performance growth.

Acquire WIPL-D source code to make up for shortcomings in the field of electromagnetics. According to the previous official account, the company recently acquired the full source code for European electromagnetic simulation software WIPL-D. The company was already quite mature in the two major directions of fluid and structure, and had certain shortcomings in the electromagnetic field. This acquisition has greatly improved the overall functional perfection of Suochen's simulation software.

A breakthrough in the civilian market and domestic and overseas acquisitions go hand in hand. The civilian market uses automobiles as a starting point and integrates sales teams to achieve continuous breakthroughs. It is expected that subsequent overseas acquisitions will focus on complementing product lines, and domestic acquisitions will focus on integrating products and channels, working together to meet domestic CAE needs.

Maintain a “buy” rating. Due to the slowdown in order confirmation and the lengthening of the implementation cycle for some orders, we lowered the 24-year engineering simulation software and simulation software development business growth rate. We expect the growth rate of engineering simulation software business to be 35%/45%/45% (previously assumed 50%/45%), and the simulation software development business growth rate will be 35%/35%/35% (previously assumed to be 70%/35%/35%). The profit forecast was lowered, and revenue of 0.43, 0.6, and 0.85 billion yuan is expected in 24-26 (the previous forecast was 0.51, 0.71, and 1 billion yuan). Due to the main downgrade assumption of the growth rate of the simulation software development business, the gross margin of this business is relatively low and the company's overall expense ratio is high, so the reduction assumption has little impact on net profit. It is estimated that net profit to mother will be 0.065, 0.081, and 0.12 billion yuan in 24-26 (previously predicted 0.068, 0.082, and 0.122 billion yuan).

Based on the company's scarce position on domestic CAE tracks, the high growth rate in the next few years, and the expansion of the civilian market and robot market, it maintains a “buy” rating.

Risk warning: Private customer growth falls short of expectations, accounts receivable recovery falls short of expectations, and the pace of order confirmation falls short of expectations.