High increase in 2024Q3 revenue, recovery of performance driven by Shintang

The company disclosed its quarterly report for 2014. From 24Q1 to Q3, it achieved revenue of 0.15 billion yuan, +82.07% year-on-year; realized net profit to mother of -22.94 million yuan, after deducting net profit of non-return to mother of -38.14 million yuan, and the loss margin narrowed year-on-year.

In a single quarter, 2024Q3 achieved revenue of 60.52 million yuan, +219.19% year over year; realized net profit to mother - -8.39 million yuan, +56.93% year over year; net profit after deducting non-return to mother - -13.47 million yuan, +60.57% year over year. Mainly in the context of the promotion of innovation in the industry and the discontinuation of CentOS, the company has accelerated business expansion in important industries such as energy, government, finance, and operators, and the revenue structure and customer structure have been further optimized.

By business, the company's operating system, cloud computing, and information security business revenue all increased from 2024Q1 to Q3. Among them, the operating system business achieved revenue of 82.0693 million yuan, +93.58% over the same period last year.

The main line product evolves iteratively, and the product functions continue to be rich

The company continues to invest in the research and development of the three major product lines, and continues to promote the rich functionality and technical iteration of the product line? Operating system: The company's server operating system was shortlisted in the “Notice on Safety and Reliability Evaluation Results (2024 No. 1)”. At the same time, in response to the CentOS shutdown, the company promptly launched two targeted solutions for system migration and system hardening.

Cloud computing products: The “District and County Xinchuang Cloud Office System” was launched for district and county Xinchuang offices, focusing in depth on the two major pain points of “difficulties in operation and maintenance services” and “difficulties in data security and confidentiality” of governments at all levels, including provinces, cities, counties, communities and townships.

Security and security business: The company's information security products have been applied and deployed in the fields of government, central enterprises, national defense, etc., and provide supporting security support platforms for special data security products for key departments.

Issued a draft equity incentive to further clarify how to increase confidence

On August 9, the company released the 2024 draft restricted stock incentive plan. The number of restricted shares to be granted under this incentive plan is 3.78 million shares, or 4.8% of the company's total share capital, of which 3.025 million shares will be awarded for the first time. According to the draft, the performance assessment for this equity incentive is: 2024/2025/2026 operating income is not less than 0.3/0.45/0.65 billion yuan. We believe that the 2025 revenue assessment target has surpassed the peak revenue since the company went public, reflecting the company's confidence in future rapid business development and rapid revenue growth.

Investment advice: Considering the previous financial constraints of the Party, Government, and Xinchuang (according to the China Great Wall announcement), we lowered our profit forecast. Revenue was adjusted from 0.688/0.893 billion yuan in 24-25 to 0.308/0.485 billion yuan, and net profit to mother was adjusted from 0.137/0.19 billion yuan in 24-25 to -0.021/0.111 billion yuan. The predicted values of additional revenue and net profit to mother for 26 years were 0.67 billion yuan and 0.19 billion yuan respectively In billion yuan, net profit for 25-26 corresponds to 50.62/29.51 times PE, respectively. Maintaining a “buy” rating in view of expected changes in Xinchuang's policies and funding.

Risk warning: Xinchuang falls short of expectations; customer growth falls short of expectations; accounts receivable are at higher risk, etc.