The net profit in 2021 was slightly lower than expected, and the deduction of non-net profit was basically in line with expectations. Dongtong announced its annual report on 2021, with operating income of 863 million yuan in 2021, an increase of 34.8% over the same period last year, and net profit of 248 million yuan, an increase of 1.5% over the same period last year. Deducting non-return net profit of 221 million yuan, an increase of 31.9% over the same period last year. In a single quarter, the company's fourth-quarter operating income was 471 million yuan, an increase of 7.2% over the same period last year, while its net profit was 210 million yuan, down 10.2% from the same period last year. As the government subsidy received by the company in 2021 is about 60 million yuan less than that in 2020, the company's net profit is slightly lower than expected; but from the point of view of deducting non-home net profit, even if the company's sales expenses increase significantly in 2021 (107% year-on-year growth), the growth trend of the company's non-home net profit is still good, which is basically in line with our and market expectations.
Trend of development
The growth momentum of the middleware business continues, and the cash flow performance is brighter than expected. The company's basic software middleware business income in 2021 was 333 million yuan, an increase of 24% on the basis of a high base in 2020. From a sub-industry point of view, on the one hand, the company continues to support the localization of middleware in government departments, on the other hand, it has also made progress in key industries such as finance, operators and high-end equipment. In 2021, the company earned about 80 million yuan from domestic middleware in the financial sector, achieving initial scale expansion; at the same time, it also achieved tens of millions of yuan in key industries such as operators, state-owned enterprises and high-end equipment. In 2022, with the further deepening of the localization of major industries represented by finance and the sinking infiltration of the localization of government departments to the township and county level, we expect that the company's basic software middleware business will continue to maintain a high income growth center. With the growth of product-based middleware business, the accounts receivable period of the company in 2021 was further optimized, while some government and enterprise projects recorded an inflow of advance receipts. under the combination of the two, the company's operating cash flow increased by 107% to 255 million yuan, and the cash flow performance exceeded expectations.
Emergency security and government-enterprise digital business trend upward, become an important growth engine. In 2021, the two major subsidiaries of the company's emergency security and government-enterprise digital business sector, Dongtong Netcom and Taize Technology, both achieved revenue growth of more than 30%. At the beginning of 2022, the company successively won the bid for large-scale intelligent emergency projects such as Beijing Winter Olympic Games Wisdom Reinsurance and Anhui Provincial Emergency Management "6000N". At the same time, the company also continued to make business breakthroughs in the field of public security. We believe that the company's emergency security and government-enterprise digital business may achieve higher-than-expected growth in 2022, contributing momentum to the continued high growth of the company's revenue side.
Profit forecast and valuation
Due to the repeated drag of the epidemic on the delivery progress of the company's safety-related business, as well as the uncertainty of the localization-related business, we downgraded the company's 2022amp 2023 revenue forecast by 6% to 1,553,493 million yuan, and lowered the company's 2022amp 2023 net profit forecast by 10% to 434kg. 592 million yuan. To maintain the outperform industry rating, due to the recent downside of the sector valuation hub, we lowered the company's valuation to 21 times 2022 sterling 2023, and lowered the target price by 31% to 27 yuan. The target price has 38% upside compared to the current share price, which corresponds to the price-to-earnings ratio of 21, 15, 2022, 2023.
Risk
The progress of domestic substitution is not as expected, and the market competition is intensified.