Incident: The company released its annual report on 23 H1. 23H1 achieved revenue of 4.831 billion yuan (YoY +6.82%), net profit of 140 million yuan (-46.39% YoY), net profit of 119 million yuan (-49.92% YoY), gross profit margin of 39.33% (YoY +2.39 pct), and net interest rate of 2.89% (YoY -2.87pct).
Among them, 23Q2 had revenue of 2,679 million yuan (YoY +7.18%, +24.51% YoY), net profit of 20 million yuan (YoY -86.41%, -82.98% YoY), net profit of 0.6 billion yuan (-95.83% YoY), gross profit margin of 36.91% (+0.89pct), and net interest rate of 0.76% (YoY -5.22pct).
Business has been growing steadily, and the gross margin of Cloud Desktop has increased significantly. By business, 23H1 network equipment revenue was 3.656 billion yuan (YoY +9.02%), with a gross profit margin of 42.36% (YoY +1.04pct); cloud desktop solution revenue of 271 million yuan (YoY +11.78%), gross profit margin of 34.55% (YoY +9.07 pct); cybersecurity product revenue of 388 million yuan (+1.26% YoY), gross profit margin of 36.3% (+1.83 pct); other revenue was 515 million yuan (-5.05% YoY), gross profit margin of 22.64% (YoY + 5.89pct).
Overseas distribution has expanded, and revenue has bucked the trend. The company has made new progress in overseas market expansion by improving compliance systems, increasing capital investment, and strengthening cooperation with local channel partners. The scope of overseas business has expanded to more than 70 countries and regions including Asia, Europe, America, and Africa. By region, 23H1 domestic revenue was 4.343 billion yuan (+5.84% year on year), gross profit margin of 39.86% (year on year +1.95 pct); overseas revenue was 488 million yuan (+16.36% year on year), and gross profit margin was 34.67% (year on year +7.20 pct).
Increased R&D investment is putting pressure on profits. In terms of expenses, 23H1's sales, management, and R&D expenses were 15.15% (year on year +1.19 pct), 4.85% (year on year +0.72 pct), and 19.57% (year on year +3.33 pct), respectively. 23H1 R&D investment was 945 million yuan (+28.71% year-on-year), due to increased R&D investment, increased R&D personnel, and increased labor costs (+33% YoY). As of June 30, 23, the company's R&D personnel accounted for 56.18%.
The market position remains leading, and operators' share has increased markedly. According to Ruijie Network's 23 annual report quoting IDC data, 23Q1 has the third largest market share in the Chinese Ethernet switch market, the third market share in the Chinese data center switch market, and the second largest market share in the Chinese enterprise WLAN market. Among them, Wi-Fi 6 products are shipped the most. Looking at specific industries, 23Q1's data center switches have the second largest market share in the Chinese Internet industry and third in the operator market share (market share increased from 17.3% in the same period last year to 24.2%).
Profit forecasts and investment recommendations. We expect the company's revenue from 2023 to 2025 to be 13.380 billion yuan, 16.936 billion yuan, and 21,494 billion yuan, respectively; net profit to be 592 million yuan, 841 million yuan, and 1,200 million yuan respectively, corresponding EPS of 104 yuan, 1.48 yuan, and 2.11 yuan respectively. Referring to comparable companies, the 2023 PE range was 48-53 times, corresponding to a reasonable value range of 50.03-55.24 yuan, and a “superior to the market” rating.
Risk warning. Technical risk; risk of increased product competition.