Incidents:

The company released its 2022 annual report and 2023 quarterly report on April 26, 2023: the company achieved revenue of 1,256 million yuan in 2022, an increase of 19.09% over the previous year; Guimu's net profit was 52 million yuan, an increase of 114.13% over the previous year. The first quarter of 2023 achieved revenue of 227 million yuan, a year-on-year decrease of 5.87%; Guimu's net profit was 1,596,500 yuan, a year-on-year decrease of 83.84%.

Comment:

The core digital lifestyle marketing sector is developing rapidly. In 2022, the digital lifestyle marketing sector achieved revenue of 952 million yuan, an increase of 51.61% over the previous year; business entity Jiangsu Oufei fulfilled a total of 99.62% of its performance promises. Business growth points come from: 1) deepening cooperation with major customers and maintaining solid cooperative relationships with major customers; 2) new customers and projects continue to land. The number of new sales contracts signed in 2022 increased by more than 100 compared to the same period last year, creating a benchmark case for the deep operation of high-net-worth bank customers; 3) Self-developed digital open platforms and SaaS platforms can achieve rapid replication between project cases and improve operational efficiency.

Innovative businesses have blossomed more and progressed in stages. 1) The company has carried out digital yuan scenario marketing cooperation with a number of digital yuan 2-tier banks and some 2.5-tier banks, making every effort to create a comprehensive digital yuan “scenario+payment” solution. 2) The company is cooperating with portal apps in more than 10 cities including Yancheng, Yangzhou, and Liuzhou to deeply empower the market-based operation of government platforms. At the same time, the company's smart business district and smart park projects in Shanghai and Yancheng are progressing in an orderly manner.

3) The company is actively exploring AI applications in bank marketing programs to effectively reduce business costs and improve efficiency, thereby strengthening business integration applications.

Increase investment in technology and expand business margins. The company's 23Q1 sales/management/R&D expenses ratio was 18.88%/13.00%/3.31% respectively, up 2.64%/3.11%/0.42% over the same period last year, mainly due to the company's strategic and business development needs. In the future, the company will greatly increase investment in scientific and technological resources and R&D funds, promote the upgrading of system platforms from artificial to intelligent, build comprehensive hard-core technology capabilities; strengthen strategic cooperation with outstanding enterprises in the fields of digital yuan chips, software, etc.; and provide solutions for innovative banking financial applications, etc. The company continues to expand its business margins and has a high degree of certainty of long-term growth.

Investment advice: We expect the company's revenue for 2023-2025 to be 1,590/20.28/2,638 billion yuan, respectively, net profit of 0.59/0.87/147 million yuan respectively, corresponding EPS of 0.09/0.13/0.22 yuan, corresponding to PE76.39/51.83/30.84X. We are optimistic about the first-mover advantage brought by the company's innovative business implementation, initial coverage, and a “buy” rating.

Risk warning: increased competition, innovative business falls short of expectations, profit forecasts and valuations fall short of expectations