2022 results are slightly below our expectations
The company announced its 2022 results: revenue of 14.664 billion yuan, an increase of 28.0%; Guimu's net profit was 546 million yuan, an increase of 2.8%, slightly lower than our expectations. We think the main reason for Q4 was the adjustment of some customer cooperation forms from personnel management/talent dispatch to business outsourcing, which affected profit performance. Furthermore, the company plans to distribute a cash dividend of 1.2 yuan for every 10 shares, with a dividend ratio of 50.15%.
On a quarterly basis, 1Q/2Q/3Q/4Q22 revenue increased by 28.1%/21.7%/27.1%/34.1%, respectively, and the net profit of the mother was +33.0%/+6.5%/-9.3%/-19.3% year-on-year.
Development trends
1. Traditional businesses actively expand customers, and emerging businesses grow at an accelerated pace. Looking at business by business, 1) Traditional business: personnel management services/talent dispatch services achieved revenue of 1,231/144 million yuan, an increase of 6.3%/8.5%. The growth rate of stock foreign customer business slowed, and the company focused on developing the domestic customer market; gross margin fell 5.6/5.0ppt to 75.6%/71.1%, mainly due to increased costs due to increased personalized demand such as on-site services from major customers. 2) Emerging business: Payroll and welfare service revenue increased 13.2% to 1,688 billion yuan, and gross margin fell 4.1ppt to 27.1%. We think the main reason was rising health management business costs. Recruitment and flexible employment services/business outsourcing achieved revenue of 803 million yuan/10.757 million yuan, an increase of 24.8%/34.6%, mainly benefiting from smooth cross-sales and strengthened recruitment delivery capabilities; gross margin fell 0.8/0.3ppt to 7.1%/1.7%, mainly due to employee returns from some customers, and the company continued to invest resources to expand its market share.
2. The gross margin of the main business is under pressure, and profitability declined in 2022. In 2022, the company's gross margin fell by 3.2ppt to 11.9%. We believe that due mainly to the increase in the share of outsourced business and the impact of competition, gross margins of all businesses are under pressure. In terms of expenses, the sales expense ratio decreased by 1.4ppt to 4.7%, and the management expense ratio dropped by 0.5ppt to 2.8%. The scale effect was evident; the R&D expenditure rate increased 0.2ppt to 0.5%, and digital investment continued to advance; and the financial expense ratio decreased by 0.2ppt to -1.0%. Under the combined influence, the net interest rate to the mother fell 0.9 ppt to 3.7% in 2022, and profitability declined somewhat.
3. Capitalization projects continue to be implemented, and digital outsourcing strategies are actively promoted. 1) In terms of capital operation, the company completed the acquisition of Yuanmao Co., Ltd. in '22, and its outsourcing focus areas complement the company's original areas of advantage. We expect to have synergies. In addition, it has also expanded its business layout in Shenzhen and other places through capital increases, joint ventures, etc., and completed 14 capitalization projects throughout the year. We expect to cultivate new growth poles; 2) Digitally, the number of cloud platform enterprises has reached 12,300 enterprise customers, and the cohesion platform serves more than 790,000 employees, and the business support platform has achieved automated reporting and reporting Batch queries speed up business by 60% and reduce labor costs by 50%, further reducing costs and increasing efficiency.
Profit forecasting and valuation
Considering some customer cooperation adjustments, we lowered our 2023/24 profit forecast by 10%/11% to $614.722 million, which currently corresponds to 2023/24 22/19 times P/E. Maintaining an outperforming industry rating and lowering the target price by 7% to 7 yuan, corresponding to 26/22 times P/E in 2023/24, there is room for 16% upward.
risks
Industry competition heightens risks, and there is a risk of macroeconomic fluctuations.