Introduction to this report:

The company's financial indicators continue to be repaired. New WineX products improve digital, cloud, and AI capabilities, and official comprehensive promotion is expected to open up space for main business growth.

Key points of investment:

Maintain the increase in holdings. The company's results for the first three quarters were basically in line with expectations. Considering that industry sentiment has yet to pick up, the 2024-2026 EPS forecast was lowered to 0.21 (-0.04) /0.28 (-0.08) /0.36 (-0.10) yuan, maintaining a target price of 10.37 yuan, and maintaining an increase in holdings.

Net profit deducted from non-net profit increased 59% in the first three quarters, and Internet healthcare revenue grew rapidly. The company's revenue of 1.91 billion yuan in the first three quarters increased 0.7% year over year. The company voluntarily abandoned some projects of poor quality and focused on high-quality internal development. Healthcare informatization fell 6% year on year to 84% (of which core product software sales and technical services fell 0.1% year on year to 74.4% year on year, hardware sales fell 34% year on year, accounting for 9.5%), and Internet healthcare revenue increased 53% year on year to 16%. Q3 single-quarter revenue of 0.69 billion yuan fell -2.8% year over year. Net profit of 0.155 billion yuan in the first three quarters increased 1.5% year over year, which was basically in line with expectations. After deducting non-net profit of 0.142 billion yuan, the difference in growth rate was mainly due to large-scale non-current asset disposal gains and losses in the same period last year. Q3 net profit to mother of 0.124 billion yuan in a single quarter decreased 8% year over year. The innovation business decreased year-on-year losses in the first three quarters. The revenue of Yunyi Nari Co., Ltd. (including Nari Health) /Yunyao Huanyao Weining Technology was 0.098/0.222/0.115 billion yuan, respectively, up 56/48/ 64% year-on-year, and net profit was -0.029/ -0.012/-0.082 billion yuan, respectively, with a year-on-year loss of 32/64/ 17%.

Organizational optimization has reduced sales and R&D expenses and improved operating cash flow. The company continues to optimize the relevant organizational structure and personnel, and reasonably control the number of personnel and costs. The sales/management/R&D expenses rate in the first three quarters changed by 12.58/7.34/ 10.94%, respectively - 4.57/-0.06/-0.78pct, respectively. The reduction in the cost rate contributed significantly to the growth of non-net profit. The company sought efficiency from management and continued to strengthen the collection and control of accounts receivable. In the first three quarters, sales repayment of 1.803 billion yuan increased 12% year over year, which was significantly higher than the revenue growth rate, and net operating cash flow of -0.104 billion yuan decreased by 60% year on year. The accrued impairment of 0.072 billion yuan fell 22% year over year in the first three quarters.

The enhanced WineX product was released, and the full promotion period was officially launched. According to the company's official public account, on October 19, 2024, the company released an enhanced WinEX product at the Winning World 2024 event. It can handle various complex application scenarios, has large-scale online delivery capabilities, and has officially entered the full promotion period. The digital, cloud, and AI capabilities of WinEX products have been further enhanced. We believe that continuous iterative product innovation will further help the company increase product value and gain more market share.

Risk warning: New business progress falls short of expectations, competition increases risk