Incident: Tianrongxin released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 1.582 billion yuan, a year-on-year decrease of 3.98%; net profit to mother was -0.169 billion yuan, an increase of 31.83% year-on-year. In the third quarter, the company achieved revenue of 0.709 billion yuan, a year-on-year increase of 10.21%; net profit to mother was 36.489 million yuan, an increase of 200.73% year-on-year.

Revenue from new businesses is growing rapidly. In the first three quarters of 2024, the company's overall product revenue structure was stable. Basic safety products accounted for the largest share of revenue of 0.994 billion yuan, a slight decrease of 4.91% over the previous year. Meanwhile, the new business maintained a relatively rapid growth rate. Among them, cloud security revenue increased 126.40% year over year, and Xinchuang's revenue increased 57.96% year over year.

The health & energy sector is growing rapidly. Among the industry segments, health and energy performed well, with revenue growth of 40.23% and 26.64% respectively. Thanks to the increase in revenue from the health and energy industry, the company's downstream customers in the Chinese enterprise sector increased, achieving revenue of 0.517 billion yuan in the first three quarters, an increase of 25.40% over the previous year.

The fee reduction paid off. The company's overall expense side continued to decline in the first three quarters. Sales/management/financial expenses for the first three quarters were 0.666/0.162/-0.003 billion yuan respectively, with a year-on-year change of +0.023/ -0.052/-0.004 billion yuan.

In terms of R&D expenses, thanks to the basic completion of the investment layout in the new direction, R&D expenses continued to decline. The company's R&D expenses in the first three quarters were 0.538 billion yuan, a year-on-year decrease of 8.05%.

Investment advice: The company continues to promote the strategy of improving quality and efficiency, and reducing fees has paid off. In the industry market, the company actively responds to industry and market developments, maintains marketing investment, and achieves good growth in new businesses. The industry market is driven by policies and demand, and the future is promising. We predict that in 2024-2026, the company will achieve revenue of 3.379 billion yuan, 3.811 billion yuan, 4.508 billion yuan; net profit to mother of 0.215 billion yuan, 0.339 billion yuan, 0.408 billion yuan; EPS 0.18, 0.29, 0.35 yuan, PE 38X, 24X, 20X, and maintain the “gain” rating.

Risk warning: Policy implementation falls short of expectations; market competition intensifies; risk of seasonal changes in revenue; technology transformation falls short of expectations.