Hiroyan Technology's Q3 revenue grew steadily, and major industries such as finance, internet, and high technology all maintained a steady trend. At the same time, the company is actively expanding emerging business fields such as digital agriculture, smart energy, and the customer base of central state-owned enterprises, and has achieved initial results. New development needs such as Hongmeng and AI models are expected to further expand the company's revenue space.

Incident: Hirohiko Technology released its 2024 three-quarter report. In the first three quarters, the company achieved operating income of 5.098 billion yuan, YoY +4.64%; realized net profit to mother of 0.178 billion yuan, YoY -20.39%; realized deducted non-net profit of 0.167 billion yuan, YoY -14.14%. Among them, Q3 achieved operating income of 1.731 billion yuan, YoY +4.42%; net profit to mother of 0.104 billion yuan, YoY +20.29%; deducted non-net profit of 98.2054 million yuan, YoY +25.79%.

Revenue grew steadily, and new business expansion achieved initial results. In the third quarter of '24, the company achieved revenue growth of 4.42%. Among them, the finance/internet/high-tech business increased 7.21%/8.81%/3.00% year-on-year respectively, all of which maintained a relatively stable growth trend. At the same time, the company is actively expanding new business areas, and continues to lay out digital agriculture, smart energy, and customer groups for central and state-owned enterprises. The new business development achieved initial results in the first three quarters, and the total amount of newly signed business contracts was 0.343 billion yuan. On the profit side, the company's Q3 sales/management/R&D expenses changed by -5.48%/+23.05%/+13.85% year-on-year respectively. However, due to changes in the yen exchange rate, the company's Q3 financial expenses were -62.65 million yuan (12.84 million yuan in the same period last year), which had a positive impact on profit, leading to a 20.29% year-on-year increase in the company's Q3 net profit.

Actively participate in the construction of the Hongmeng ecosystem and help industry customers implement AI big model applications. Facing the development needs of the Hongmeng system, the company was one of the first members of the Hongmeng Service Provider Pioneer Program and actively participated in the Hongmeng Qianfan Program to provide customers with service development, launch and technical support for the Hongmeng application ecosystem. Currently, the company mainly provides financial customers with development services related to Hongmeng, including external mobile application development and internal management application development, and has won several orders related to Hongmeng. At the same time, the company continues to seize AI model development opportunities. On the one hand, it explores the data governance and labeling aspects required for training models, and on the other hand, it helps customers implement AI big models in business scenarios. It is expected that new development requirements such as Hongmeng and AI will open up more business space for the company.

Maintain a “Highly Recommended” investment rating. The company's traditional business is developing steadily, while actively expanding emerging business areas such as digital agriculture, smart energy, and the central state-owned enterprise customer base. Initial results have been achieved. New development needs such as Hongmeng and AI models are expected to further expand the company's revenue space. The company's net profit for 2024-2026 is expected to be 0.194/0.218/0.252 billion yuan, maintaining a “highly recommended” investment rating.

Risk warning: New business promotion falls short of expectations; R&D progress falls short of expectations; risk of exchange rate fluctuations; risk of macro-environmental fluctuations; geopolitical risk.