By focusing on the main business and driving innovation, the company achieved a reduction in cost ratios and a significant improvement in operating cash flow. The launch of products such as “Perseverance Intelligence”, “Business Intelligence Shield”, and “Digital Router” data terminals further enhances the company's core competitiveness in the field of digital security.

Incident: The company released its report for the third quarter of 2024. In the first three quarters, it achieved operating income of 1.145 billion yuan and YoY -5.20%; realized net profit due to mother -0.336 billion yuan, YoY +37.26%; realized net profit after deduction of -0.355 billion yuan, YoY +36.06%; achieved net operating cash flow of -0.397 billion yuan, YoY +41.36%.

Q3 achieved revenue of 0.447 billion yuan in a single quarter, YoY -12.67%; realized net profit to mother -0.06 billion yuan, YoY +52.40%; realized net profit deducted from non-mother -0.069 billion yuan, YoY +48.51%.

Per capita efficiency and quality of operations continued to improve, and losses continued to narrow. Q3 The company's losses continued to narrow drastically. We believe that the main reason is that the company continues to focus on its main business, driving development through innovation, and continuously improving per capita efficiency and operating quality. The company's sales expenses, R&D expenses, and management expenses all declined in the first three quarters. The first three quarters achieved a sales/management/ R&D expense ratio of 46.37%/9.52%/31.59%, a year-on-year change of -10.44/ -2.83/11.95pct. Operating cash flow performance improved significantly. Net cash flow from operating activities increased 41.36% year-on-year in the first three quarters, and operating cash flow recovered to 31.46 million yuan in the third quarter.

“Persistent Brain” continues to empower and activate the value of data elements. The company continues to empower its business line with the Hengbrain Security Platform Model. During the reporting period, it officially released “Everbrain Smart Learning” and “Business Intelligence Shield - Ransomware Detection, Protection and Recovery All-in-One Machine”. The Hengbrain Security Assessment Center was awarded the highest level of security service capability of the Big Model of the China Software Evaluation Center. In terms of data element security, the company's Hengyin privacy computing platform was iteratively upgraded during the reporting period, and the data terminal product “digital router” was newly released. The “digital router” has data asset maps, private computing, and data circulation transactions as core functions, helping all sectors build a “1+1+N” trusted data space covering a data circulation utilization base, a management center, and N number of digital routers, further promoting the activation of data element values.

Maintain a “Highly Recommended” investment rating. The company's net profit for 24-26 is estimated to be 0.022/0.099/0.178 billion yuan, maintaining a “highly recommended” rating.

Risk warning: Policy implementation falls short of expectations, industry competition intensifies, and costs rise