Incident: On the evening of October 24, 2024, the company released its three-quarter report. In the first three quarters of 2024, the company achieved revenue of 1.284 billion yuan, +7.38% year over year; realized net profit of 0.116 billion yuan, +12.06% year over year; net profit without return to mother was 0.106 billion yuan, +24.82% year over year.

Net profit from 3Q2024 increased 73.4% year over year, and expenses were well controlled. The company's 3Q2024 revenue was 0.469 billion yuan, +7.26% YoY, net profit 0.028 billion yuan, YoY +73.4%, net profit not attributable to mother 0.023 billion yuan, +58.24% YoY, with good rate control. The 3Q2024 sales/management/R&D/finance expense rates were 19.91%/10.76%/25.27%/-1.33%, respectively, compared with the same period last year. +0.69pct. Gross margin remained stable. 3Q2024 gross profit margin was 59.49%, down 0.44 pct from the same period last year (59.92%).

The healthy development of B-side digital finance and taxation has led to a continued improvement in contract liabilities and cash flow. As of September 2024, the company's contract debt was 0.749 billion yuan, an increase of 12.1% over the previous year. It is mainly due to the healthy development of B-side business, and orders from micro, small and medium-sized enterprises continued to grow. The net cash flow from 3Q2024's operating activities was 0.18 billion yuan, an increase of 92.27% year over year, achieving rapid growth.

Fiscal and taxation reform measures are expected to be gradually introduced, and the “Sai Yu” model will accelerate the development of “fiscal tax+AI”.

On October 12, 2024, Finance Minister Lan Foan stated in response to the fiscal and taxation system reform question that “it is planned to focus on introducing a number of reforms that are ripe and within reach this year and next two years,” and the relevant tax reform plan is expected to be gradually introduced. Based on pre-training and fine-tuning data in the fiscal and taxation field of tens of billions of tokens, the company created a vertical model “Sai Yu” in the finance and taxation field to anchor micro, small and medium-sized enterprise users to launch “intelligent tax management” high-value products with tax compliance as the core, which is expected to drive the gradual increase in the ARPU value of B-side businesses.

Investment advice: The company has a significant competitive advantage in the field of finance and taxation SaaS. As the G-side business continues to be optimized, the overall profit level is expected to continue to rise. We expect the company to achieve operating income of 1.976/2.17/2.409 billion yuan and net profit of 0.148/0.243/0.345 billion yuan in 2024-2026. The corresponding PE was 77.78/47.43/33.34 times, respectively, maintaining the “gain” rating.

Risk warning: G-end customer budgets have increased and tightened, B-side competition has intensified, and tax-preferential compliance products fall short of expectations.