The digital performance of the industry was impressive in 2022, and the gross margin of self-developed products increased significantly. In 2022, the company's revenue was 3,007 billion yuan, up 6.98% year on year; net profit of Gimu was 438 million yuan, up 122.14% year on year; net profit after deducting non-return mother's net profit was 83 million yuan, turning a loss into a profit over the previous year. Among them, industrial digitalization performed well, achieving revenue of 766 million yuan, up 35.51% year on year, gross profit margin of 34.27%, up 9.21 pct year on year; digital financial revenue was 678 million yuan, up 21.14% year on year, gross profit margin of 28.74%, up 2.78 pct year on year.

Non-net profit after deducting non-net profit increased slightly in Q23, and the proportion of self-developed research continued to rise to 50%. In Q1 2023, the company gradually emerged from the impact of the epidemic. At the same time, due to the impact of the general economic environment, ITO business demand declined in the short term. The company achieved operating income of 720 million yuan in the first quarter, an increase of 1.14% over the previous year; Guimu's net profit was 32 million yuan, a decrease of 91% over the previous year; and Guimu deducted non-net profit of 22 million yuan, an increase of 9% over the previous year. Among them, industrial digitalization achieved revenue of 200 million yuan, an increase of 14.87% over the previous year. As of Q1 2023, the share of the company's independent software product business reached 50%, a significant increase compared to 45.92% in the same period last year, and the strategy to strengthen the independent software business is still being effectively implemented.

Baidu is the third largest shareholder of the company, and uses Wen Xin's words to jointly promote B-side applications. The company has deepened cooperation with Baidu. Baidu took a stake in Hande Information in 2019 and is currently the third largest shareholder of Hande Information. In February 2023, the company joined Baidu Wenxin's one-word ecosystem, connected to Baidu Wenxin's one-word ability, and jointly promoted the in-depth application of B-side artificial intelligence. At present, the company has created application solutions for various scenarios based on AI technology. Digital workers are one of the mature capabilities. Currently, it is applied in various fields, especially in the financial field. In 2022, the company's Easy-LinkRPA has implemented relevant AI cases in the financial field. It is expected that in 2023, the company will expand application exploration of new technologies related to AIGC and big models. On the one hand, it will expand open source by incubating related application products and solutions, and on the other hand, use new technology to improve its own efficiency and even promote self-transformation.

Profit forecast: We forecast that in 2023-2025, the company will achieve operating income of 39.00, 48.48, and 5.856 billion yuan, up 29.72%, 24.29%, 20.79% over the previous year; achieve net profit of 2,82, 4.26, and 528 million yuan, up -35.64%, 51.21%, 23.90% over the previous year; and achieve earnings per share (recently diluted) 0.29, 0.44, 0.55 yuan/share, with initial coverage, giving a “buy” rating.

Risk warning: Competition in the industry is intensifying, and the expansion of self-developed products falls short of expectations.