Shiji Information released its three-quarter report. In Q1-Q3 of 2024, revenue was 2.016 billion yuan (yoy +8.46%), net profit of 15.8834 million yuan (yoy +10.16%), deducting non-net profit of 11.6744 million yuan (yoy +123.91%). Among them, Q3 achieved revenue of 0.634 billion yuan (yoy -3.64%, qoq -15.53%) and net profit to mother of -8.8398 million yuan (yoy -12.04%, qoq -166.30%). The company is a leader in the hotel SaaS industry, and its next-generation cloud architecture products have been recognized by leading international customers. Furthermore, by actively promoting platformization, the company continues to reach more links such as payments, further opening up room for growth. We are optimistic that the company's cloud transformation will continue to advance and maintain a “buy” rating.

Cloud PMS breaks through Kempinski, and cloud revenue is expected to accelerate

24Q3 announced that Shiji Germany, a wholly-owned subsidiary of the company, signed an agreement with Kempinski Hotels Group, agreeing that the company will use SaaS services to provide cloud-based enterprise hotel information management system Shiji Enterprise Platform, Shiji Payment Solution and other products. Customers will first actively carry out hotel launch plans in mainland China according to their hotel group plans. The signing of this agreement marks a further breakthrough for the company's SEP products in the international hotel chain. Previously, the company's SEP products had been recognized by four international benchmark customers, Peninsula, Intercontinental, Langham, and Macau, and had already been launched in batches at Peninsula, Intercontinental, and Langham. The signing and launch of a new generation of SEP products is expected to accelerate the growth of the company's cloud revenue and provide impetus for the company's performance growth.

Improve cost usage efficiency and focus on downstream demand restoration

The overall gross margin of 24Q1-Q3 was 46.98%, a year-on-year change of -0.95pct. The sales/management/R&D expense ratio was 10.75%/27.25%/11.89%, -1.31pct/-0.09pct/-1.40pct year-on-year. As cost reduction and efficiency increases continue to advance, the efficiency of cost use has improved. Net operating cash flow was -21.5059 million yuan, +82.34% year over year. The company increased its collection efforts, and net operating cash flow improved year on year. We believe that as the company's SEP platform-level products mature, operating efficiency is expected to continue to improve in the future, and profits are expected to gradually achieve steady growth. Judging from the pace of progress, we believe that in the future, as downstream demand gradually recovers, the pace of implementation of the company's cloud products may further accelerate.

Profit forecasting and valuation

We maintain the company's 2024-2026 EPS at 0.03, 0.05, and 0.08 yuan respectively. According to the segmented valuation, cloud business revenue/traditional business net profit is estimated at 0.79/0.46 billion yuan in 2025, which is comparable to the company's 25e9.5XPS/39.6PE. Considering the company's accelerated promotion of cloud-based virtualization or helping to accelerate the opening of multiple links, the cloud-/traditional business is given 25E 10.7XPS/39.6xPE, with a target price of 9.80 yuan (previous value of 6.11 yuan), maintaining the “buy” rating.

Risk warning: macroeconomic fluctuations; progress in the marketing of cloud-based products falls short of expectations.