The company published the first quarter report of 2023. The company achieved revenue of 1,475 million yuan in the first quarter of 2023, an increase of 5.14% over the previous year; the net profit of the mother was 236 million yuan, an increase of 4.91% over the previous year.
Key points of investment:
Operating indicators were steady, and large orders were received in the first quarter: in Q1 2023, the company's gross margin was 39.46%, down 0.81 pct from the previous year. The sales/management/R&D expenses ratio was 8.14%/6.37%/8.14%, respectively, with year-on-year changes of -0.20pct/0.45pct/0.16pct, respectively. The overall cost ratio was relatively steady, and R&D investment continued to increase. The company's market expansion was good in the first quarter. The fintech and urban intelligence sectors worked together. They won the bid for the first and second packages of the Agricultural Bank's 2022 super counter project, which included cash and non-cash equipment, with a total project amount of 628 million yuan; the holding subsidiary Guangtelecom won the bid for the “2023 Shenzhen Telecom Integrated Service Procurement for the Longhua Xueliang Project” project, which won the “2023 Shenzhen Branch on Longhua Xueliang Project Equipment Supplier Introduction” project, with a total bid amount of 166 million yuan.
The promotion of digital yuan is accelerating, and the company has a first-mover advantage and is expected to be the first to benefit: Recently, Changshu City in Jiangsu Province announced that starting in May, full digital yuan wages will be paid to civil servants (including those participating in the public service), business personnel, and personnel of state-owned enterprises at all levels, marking significant progress in the application of digital yuan in the financial field. The company has the ability to build a full chain of digital yuan scenarios, and can provide integrated digital yuan solutions including terminal products, system platforms, scenario solutions, and ecological operations. As of December 31, 2022, a total of 9 banks have implemented digital yuan systems, implemented smart contract platforms for use in more than 10 cities, and accumulated deep project implementation experience. We believe that as the application scenarios and scale of digital yuan continue to expand, the company is expected to take the lead in obtaining relevant project opportunities.
Profit forecast and investment advice: The company's revenue for 2023-2025 is estimated to be 8383/92.00/10.064 billion yuan respectively, and the net profit of the mother is 955/ 10.69/1,179 billion yuan respectively. Corresponding to the closing price of PE on April 27, 2023 was 29.78x/26.61x/24.11x respectively, maintaining the “increase in holdings” rating.
Risk factors: The implementation of the digital yuan fell short of expectations, and the advancement of financial innovation fell short of expectations; the marketization of digital data elements fell short of expectations; market competition intensified; technology research and development fell short of expectations; risk of exchange rate fluctuations.