The company's operating system growth exceeded expectations in '22, the scale effect gradually became apparent, and the gross margin of the three core businesses increased. The company's operating system actively embraces the Huawei Euler ecosystem, which helps enhance product competitiveness and maintains a “highly recommended” investment rating.
Incident: The company released its 2022 financial report. The company achieved revenue of 400 million yuan for the full year of 2022, YoY +18.45%; net profit of Guimo was 129 million yuan, YoY +15.33%; after deducting net profit of 112 million yuan from non-Gwimo, YoY +28.00%.
Operating system growth exceeded expectations, and the scale effect gradually became apparent, driving an increase in gross margin. The company achieved revenue of 157 million yuan in a single quarter of 22Q4, YoY -4.67%; net profit of returned mother of 55 million yuan, YoY -19.16%; after deducting net profit of non-return mother, 48 million yuan, YoY -22.37%. By product line, the company's information security achieved revenue of 182 million yuan last year, YoY +8.06%, which is expected to be mainly affected by fluctuations in defense procurement; operating systems achieved revenue of 111 million yuan, YoY +57.43%, and revenue growth exceeded expectations; cloud computing achieved revenue of 100 million yuan, YoY +8.87%; technology development services achieved revenue of 0.3 billion yuan, YoY +111.47%. Looking at the industry, the company maintained steady growth in the defense and power customer industries. The defense industry achieved revenue of 304 million yuan, YoY +20.46%; the power industry achieved revenue of 68 million yuan, YoY +13.14%. The company will continue to expand in advantageous fields such as national defense and electricity. In addition, it is also actively expanding into important industries such as finance, government affairs, energy, and transportation, creating CentOS operating system migration solutions suitable for various industries, and expanding application cases of cloud desktops and data security storage products in the fields of finance and government affairs. In terms of gross margin, the gross margins of the company's three core businesses have all increased. The gross margins of information security, operating systems, and cloud computing were 68.43%, 97.63%, and 45.75% respectively, with year-on-year increases of 1.02 pct, 1.31 pct, and 0.83 pct. The scale effect is gradually showing.
Actively embrace the Huawei Euler ecosystem, and benchmark cases help accelerate expansion. The company's operating system actively embraces the Huawei Euler ecosystem. The V3.5.1 version built on OpenEuler 22.03 LTS was officially released. It can support various types of devices such as servers, cloud computing, edge computing, etc., cover all IT, CT and OT digital infrastructure requirements, unify application development interfaces, and fully support diverse computing, including CPU architectures such as Kunpeng, Feiteng, Haiguang, MegaSi, Longxin, Risc-V, Intel X86, etc. At the same time, the company further strengthened its product's leading edge in security and launched value-added software such as host security reinforcement software V1.0, secure container platform system V1.0, screen recording audit software V1.0, and security probe software V2.2. We believe that the Euler ecosystem will help improve the functionality and ecological adaptation of the company's operating system, which is expected to further strengthen the competitiveness of products in Xinchuang. The company also launched a number of benchmark projects in 2022, which will help accelerate expansion for major customers in the future. The company provided Kirin Xinan products and solutions to more than 100 organizations in the defense field; secured the launch of Shenzhou 14 and 15 manned spacecraft; participated in the construction of the first batch of digital converter stations for the State Grid and completed breakthrough deployments in various fields of new energy generation; and provided cloud services for financial institutions such as Bank of Changsha, Guizhou Agricultural Credit, China Life Insurance, etc.
Maintain a “Highly Recommended” investment rating. As Xinchuang pushes for superimposed CentOS to stop, the company's server operating system is expected to accelerate penetration. The company's net profit is expected to be 1.61/2.06/280 million yuan in 23-25, maintaining the “highly recommended” investment rating.
Risk warning: industry expansion falls short of expectations, competition intensifies, policies fall short of expectations.