Core views

The 24Q3 company's revenue was +23.12% year-on-year, and continued to grow at an accelerated pace, mainly due to outstanding flexible employment performance; net profit to mother -9.60% year-on-year, and net profit not attributable to mother after deducting equity payment fees was +14.8% year-on-year. A total of 0.3608 million/ +17.0% were dispatched for flexible employment in the third quarter. At the end of the period, the number of outsourced workers reached 42,400, a net increase of 3,700 month-on-month (net increase of 700 and 2,500 in Q1 and Q2 respectively), and the net increase in the number of people accelerated month-on-month. The revenue of the 24Q3 middle and high-end talent search business in a single quarter was +2.33% year-on-year, and turned positive.

24Q1-3's domestic revenue also increased 27.1% (24H1 growth rate of 24.6%), and the UK subsidiary's revenue and profit declined year over year. Looking forward to the continuation, wait for the recovery in recruitment demand as economic activity gradually picks up to drive positive performance.

occurrences

The company released its 2024 three-quarter report: in the first three quarters of 2024, the company achieved revenue of 8.516 billion yuan/ +18.77%, net profit of 0.135 billion yuan/ -10.96%, net profit after deducting non-return to mother of 0.112 billion/ -2.77%, basic EPS of 0.69 yuan/ -11.07%, and ROE (weighted) of 7.28% /-0.24pct.

Brief review

Q3 Accelerated growth from quarter to quarter, and net profit to mother, excluding the impact of equity incentive expenses, increased relatively well. The 24Q3 company achieved revenue of 2.975 billion yuan/ +23.12%, and continued to grow at an accelerated pace, mainly due to outstanding flexible employment performance. Net profit for 24Q3 was 0.049 billion yuan/ -9.60%, net profit after deducting non-attributable net profit of 0.048 billion yuan/ +7.45%, net profit after deducting equity payment fees was 51.006 million/ +14.8%. The overall performance was good. The company's equity incentive target is to increase revenue or profit (excluding equity incentive payments) by 30% (100% exercise) and 24% (80% exercise) in 2024. The 2024-2027 cost-sharing amounts to 26.93 million, 13.72 million, 5.69 million, and 0.77 million yuan.

By business, the flexible employment business grew rapidly, and the recruitment sector turned positive in Q3. 1) Flexible employment: 24Q1-3's overall flexible employment business revenue increased 20.59% year-on-year, up from +18.7% in the first half of the year. A total of 0.3608 million/ +17.0% were dispatched for flexible employment in the third quarter. At the end of the period, the number of outsourced workers reached 42,400, a net increase of 3,700 month-on-month (net increase of 700 and 2,500 in Q1 and Q2 respectively), and the net increase in the number of people accelerated month-on-month. 2) Recruitment: The revenue of the 24Q3 middle and high-end talent search business increased 2.33% year-on-year in a single quarter, and revenue correction was achieved.

By region, domestic growth is good, and foreign countries are still under pressure. 24Q1-3's domestic revenue also increased by 27.1% (24H1 growth rate of 24.6%). Customers in China were 17% foreign/joint ventures, 71% were private enterprises, and 11% were government, central/state-owned enterprises, and institutions; overseas business was affected by factors such as uncertainty in the global economic environment, geopolitics, and inflationary pressure, and recruitment demand was still under pressure, and the revenue and profits of the British subsidiary declined year on year.

Gross margin declined due to the increase in the share of skilled workers, and overall cost control was good. The gross margin of the 24Q1-3 company was 6.75%/-1.02pct, and the 24Q3 company's gross margin was 6.87% /-1.17pct, -0.18pct month-on-month, mainly due to the increase in the share of the clever engineering business. 24Q1-3 net margin was 1.57% /-0.82pct, Q3 net margin was 1.65% /-0.64pct. On the cost side, the sales, management, R&D, and finance cost rates of 24Q1-3 were 1.53% /-0.36pct, 2.40% /-0.13pct, 0.46%/-0.08pct, and 0.22% /+0.29pct, respectively. Looking at a single quarter, the 24Q3 sales, management, R&D, and finance expense ratios were 1.56% /-0.22pct, 2.24% /-0.38pct, 0.45% /-0.12pct, and 0.18% /+0.15pct, respectively. The cost rate was properly controlled.

Investment advice: The company's 2024-2026 revenue is expected to be 11.42, 13.29, and 15.41 billion yuan, respectively, up 16.7%, 16.4%, and 15.9%; net profit to mother is 0.201, 0.23, and 0.261 billion yuan, respectively, +0.48%, +14.3% year-on-year; corresponding P/E is 20, 17x, and 15x, maintaining a “buy” rating.

Risk warning: 1) Model transformation risk: The company's asset size, personnel size, and business scale are being further expanded, and the management model needs to be adjusted in a timely manner to maintain the company's competitiveness. If the company's management level fails to meet the needs of the company's size, it will affect the company's business development. 2) Talent loss and training risk: China's human resources industry is developing rapidly and industry concentration is low. With a highly qualified team of talents, the company has a certain competitive advantage in the industry. If the company fails to enhance its core competitiveness in the future, it will affect the company's business development. 3) Macro market changes, and the risk that employment demand falls short of expectations:

If the macroeconomic climate declines in the future and affects the employment needs of enterprises, it will affect the company's middle and high-end talent search business and flexible employment business needs.