Introduction to this report:

The decline in the company's revenue has narrowed, profits have been re-achieved in a single quarter, and the commercialization strategy has progressed smoothly. The gross margin in a single quarter has reached a record high. The core links of card credit innovation and data elements are expected to exceed expectations.

Key points of investment:

Maintain the “Overweight” rating and maintain the target price of 39.71 yuan. Maintaining the profit forecast, the company's EPS is expected to be 0.61/0.96/1.40 yuan respectively in 2024-2026, maintaining a target price of 39.71 yuan, corresponding to 41.25 times PE in 2025, and maintaining the “gain” rating.

The decline in revenue narrowed, and profits were restored in a single quarter. The company released three quarterly reports. In the first three quarters of 2024, the company achieved revenue of 4.338 billion yuan, a year-on-year decrease of 16.92%; realized net profit attributable to mother -0.028 billion yuan, a year-on-year decrease of 121.42%; and realized net profit deducted from non-mother -0.035 billion yuan, a year-on-year decrease of -129.08%. In the third quarter of a single quarter, the company achieved revenue of 1.724 billion yuan, a year-on-year decrease of 14.67%. The decline was narrower than the mid-report; achieved net profit of 0.131 billion yuan, an increase of 60.73% year-on-year, achieved loss-to-profit conversion, and the highest net profit in the third quarter in history; achieved net profit deducted from non-mother of 0.129 billion yuan, an increase of 71.90% year on year.

The commercialization strategy progressed smoothly, and gross margin reached a record high in a single quarter. The company continues to promote the transformation of commercialization strategies and promote the continuous development of cloud and data service businesses represented by independent software products centered on databases, OA, etc., and trusted data space platforms, thereby promoting the continuous increase in the company's gross margin and continuous improvement in revenue quality. The company's gross sales margin reached 32.50% in the third quarter, up 3.29 percentage points from month to month, up 2.51 percentage points from year to year, and the gross margin reached a record high in the single quarter.

The company's card is the core link of Xinchuang and data elements, and the development is expected to exceed expectations. The holding subsidiary CLP Jinchang has already passed the safety and reliability evaluation of three databases. Since 2020, it has sold the most units in the key application areas of domestic databases for four consecutive years. On October 30, 2024, it won the bid for CNOOC Group's 2024-2027 centralized database framework procurement project with a 60% share. With the deepening of industry innovation and the recovery of government innovation, the database business is expected to contribute more profit flexibility. On October 21, 2024, the “Taiji Trusted Data Space Platform V1.0” successfully passed the China Academy of Information and Communications Technology Data Space Capability Special Test. The company became the first enterprise to complete this test. The Taiji Trusted Data Space Platform has key capabilities such as multi-source data access management, data classification and classification, data use control, data product development and delivery, trusted data transactions, and full process detectable traceability. At present, preliminary tests and verification have been carried out in the fields of transportation, industrial manufacturing, etc. With the continuous advancement of data elements, the Taiji Trusted Data Space Platform is expected to achieve business relatively quickly Implemented to drive performance growth beyond expectations.

Risk warning: Risk of shrinking IT budgets for downstream customers and increased competition in the market.