The company's 2022 performance is in line with our expectations
Sheng Ye announced its 2022 results: the company's revenue was +39% year on year to 800 million yuan; Guimu's net profit margin was 220 million yuan, Guimu's net profit margin was 27%, and adjusted net profit was +10% to 250 million yuan year on year, in line with our previous expectations.
Development trends
The digital finance business is growing steadily. The company's digital finance business revenue (interest income+guarantee fee revenue) in 2022 was +45% to 630 million yuan (accounting for ~ 78% of total revenue), of which interest income (~ 75.5%) /guarantee fee revenue (share ~ 2.5%) +47%/+3%, respectively. We believe that its digital finance business was able to achieve steady growth mainly due to the continued increase in the average daily balance of its supply chain assets up to the end of 2022 (average daily balance +53% to 6.81 billion yuan), but the revenue growth rate was lower than the company's main focus during the pandemic This is due to a slight decline in the yield of venture operations and a rise in the cost of foreign capital, leading to a narrowing of interest spreads. Looking ahead, we think it is expected that it will use in-depth cooperation with high-quality local state-owned enterprises (such as Ningbo Development Investment/Xiangyu Jinxiang Holdings, etc.) to further leverage incremental capital, help steady growth in business scale, and effectively reduce its capital costs through greater use of domestic financing.
The platform business is expected to contribute to the increase in revenue. The company's platform's Inclusive Matching Service Revenue in 2022 was +46% year on year to 0.7 billion yuan, mainly due to the fact that the average daily balance of the Inclusion Matching Business of off-balance sheet platforms was +23% to 1.99 billion yuan compared to the same period last year, and the company's small and micro financing service rates rose slightly as the company gradually moved down the Inclusive Service Node. Looking ahead, with the gradual recovery of financing demand for micro, small and medium-sized enterprises after the epidemic and commercial banks' demand for high-quality micro, small and medium-sized assets remained relatively strong, we believe that the company's business has some potential for development.
The industrial Internet business is expected to achieve synergies. The company's industrial Internet business revenue in 2022 was 0.3 billion yuan, about 19 times that of 2021, mainly due to the rapid growth in bid and contract amount signed in this sector, and the contract amount signed in 2022 to 78 million yuan. The signed industrial Internet projects include smart construction site projects such as China Construction Group's Shenzhen Pengcheng Laboratory and Taizi Bay New World Family Shopping Mall, as well as hospital SPD projects such as Leshan People's Hospital, Zhecheng Hospital, and Hebei University Affiliated Hospital. Looking ahead, we believe that the company's industrial Internet business is expected to achieve complementary advantages with its relatively mature supply chain finance business, make full use of the link capabilities of the Shengye platform, and gradually increase the gross profit level of its business through optimization of service methods.
Profit forecasting and valuation
With the accelerated release of enterprise supply chain financing demand after the pandemic, the company's business scale expansion is expected to accelerate and capital costs are expected to decline steadily. The company's 2023e/2024e net profit forecast for 2023e/2024e is raised by 9%/10% to 33/40 billion yuan respectively. The company is currently trading at 15x/12x 2023e/2024e P/E, maintaining the company's outperforming industry rating and target price of HK$7.3 (based on 19x 2023e P/E), with room for a 27% increase from the current stock price.
risks
Supply chain financial assets have fallen short of expectations; regulatory policies have become stricter; and asset quality has fluctuated greatly.