ROPEOK(SH:688619) Zheng Quan Zhi Xing·2025-06-23 12:48Core Viewpoint - The company received an inquiry letter from the Shanghai Stock Exchange regarding its 2024 annual report, prompting a detailed analysis and response concerning significant fluctuations in revenue and gross margin, particularly in its social security system solutions business. Revenue Analysis - The company's revenue for 2024 was significantly impacted by a decline in the social security system solutions segment, with a revenue drop of 72.62% from 2023, amounting to 110.60 million yuan compared to 404.02 million yuan in the previous year [4][18]. - The gross margin for the social security system solutions decreased to 4.60%, down 26.52 percentage points from the previous year, primarily due to increased competition and project complexity [18][20]. Industry Context - The overall industry is experiencing pressure due to tightened government budgets, leading to cautious investment decisions by clients, primarily government departments [6][18]. - The company operates in a competitive environment with many entrants in the AI and public safety sectors, which has intensified competition and affected revenue generation [6][8]. Business Model Adjustments - To enhance cash flow and reduce risk, the company adjusted its business strategy to prioritize projects with stable funding sources, such as those backed by government financial support, resulting in the selective abandonment of less certain projects [8][18]. - The company reported a 32.73% increase in maintenance and other service revenues, attributed to the commencement of maintenance services for previously accepted projects [4][12]. Client Dynamics - The company experienced changes in its top clients, with several new clients emerging in 2024 due to successful project completions, while others exited the top client list as their projects moved into maintenance phases [5][6]. - The fluctuation in major clients is common in the industry, influenced by project cycles and varying acceptance timelines [5][6]. Comparison with Peers - Compared to industry peers, the company's revenue decline of 68.08% was more pronounced, with competitors like Qianfang Technology and Dahua Technology experiencing smaller declines of 6.99% and 0.12%, respectively [7][8]. - The average gross margin for comparable companies also declined, but the company's drop was notably larger, indicating a more severe impact from the current market conditions [19][20].