Short-term performance in 2022 is under pressure; 1Q23 profitability is expected to improve According to the company's 2022 annual report, the company's revenue/net profit returned to the mother in 2022 was 23.33/-272 million yuan respectively, down 13%/729% from the previous year. Among them, Q4 single-quarter revenue/net profit of the company was 677/-199 million yuan respectively, falling 38%/1153% year-on-year, mainly due to factors such as changes in the macroeconomic environment at home and abroad, market downturn, increased competition, and some projects and order delivery fell short of expectations. According to the company's performance forecast, consolidated gross margin is expected to improve in 1Q23. Considering the fluctuation in the pace of delivery of some of the company's orders, we expect the company's net profit to be 0.87/153/236 million yuan from 2023 to 2025 (previous value: 1.24/209/100 million yuan). Comparable to the company's Wind 2023, the average PE value is 74x. Considering that the company's transportation business and public security business are expected to continue to make breakthroughs, the company was given 90xPE in 2023 with a target price of 4.51 yuan (previous value: 4.05 yuan), maintaining the “increase in holdings” rating.
Demand for some product lines fluctuated in 2022; the company's transportation industry revenue showed resilience. Looking at the product line, the company's IoT connectivity and terminal and application revenue in 2022 was 1,387 million yuan, a decrease of 7.63% over the previous year; revenue from police terminals and police informatization applications was 211 million yuan, a decrease of 46.19% over the previous year; software system and solution revenue was 735 million yuan, a decrease of 5.71% over the previous year. By industry, in 2022, the company's public security industry revenue was 767 million yuan, a year-on-year decrease of 17.79%; the telecommunications industry revenue was 452 million yuan, a decrease of 36.99% over the previous year; the transportation industry's revenue was 889 million yuan, an increase of 6.47% over the previous year. According to the company's annual report, the company's front-mounted T-Box products achieved loading coverage of major Geely customers. Furthermore, in terms of railway business, the company's next-generation GYK-160 project completed CRCC certification and sales of China Railway Inspection and Certification Center, which is expected to become a new growth point in the future.
The consolidated gross margin declined slightly in 2022; the cost side was basically stable. The company's comprehensive gross margin in 2022 was 26.23%, down 1.80 pct from the previous year. By sector, the gross margin of the company's IoT connections and terminals and applications in 2022 was 30.74%, an increase of 0.73 pct over the previous year. Among them, the gross margin of Internet of Vehicles products was 18.88%, a decrease of 3.58 pct over the previous year; the gross margin of police terminals and police informatization applications was 44.00%, an increase of 0.14pct over the previous year; the gross margin of software systems and solutions was 12.62%, a decrease of 3.66 pct over the previous year. Expenses were basically stable. The company's sales/management/R&D expenses ratio in 2022 was 13.44%/7.87%/13.21%, respectively +2.36pct/-0.06pct/-0.12pct, respectively.
Losses are expected to be reduced in 1Q23, and revenue quality is expected to improve
According to the company's first-quarter performance forecast, the company expects 1Q23 revenue to be 330 to 350 million yuan, a decrease of 13% to 18% over the previous year; the net profit of Guimu is -0.25 to -15 billion yuan, a year-on-year loss of 69% to 81%. The company is actively developing business in vertical IoT application fields such as the Internet of Vehicles, smart transportation, and public safety. Although 1Q23 revenue declined compared to the same period last year, revenue quality is expected to improve, and overall gross margin is expected to increase. Coupled with the company's strengthening of cost control and focusing on resource investment, the loss amount of 1Q23 narrowed year-on-year.
Risk warning: The order volume falls short of expectations, and there is a certain cycle of new customer expansion.