Incident: The company disclosed its semi-annual report for 2023. At 2023H1, the company achieved operating income of 9.209 billion yuan, +35.70%; net profit of 345 million yuan, +7.07% of the same period; net profit of 259 million yuan after deducting non-return net profit of 259 million yuan, +2.01% year-on-year.
Outsourcing business increased sharply, and gross margin declined: 2023H1, the company's gross margin was 10.38%, year-on-year -2.48pct; sales/management/development/finance expense ratios were 3.94%/2.46%/0.29%/-0.69%, respectively, and -1.30/-0.36/+0.01/+0.37 pct. By business, business outsourcing/recruitment and flexible employment/personnel management/talent dispatching/compensation and benefits contributed 71.18/5.37/5.37/5.97/0.70/869 million yuan respectively. Among them, business outsourcing, recruitment and flexible employment increased by 44.41%/38.55%, respectively.
Dig deeper into customer needs and improve product expertise: 2023H1, 1) Personnel management business and talent dispatch business added 7 thousand person projects and won 17 competitive marketing customers with more than 300 people; 2) Compensation and welfare business added 21 projects with more than 1,000 people, revenue increased 11.2% year over year; 3) Recruitment and flexible employment business maintained rapid development, with service numbers increasing 25% year on year; 4) New customers in the business outsourcing business increased 20% year on year, and number of people served increased 7% year on year. The synergistic effect of external services was initially revealed. During the reporting period, 29 new signatory customers were drawn through external services.
Comprehensively build a digital organization and focus on promoting digital transformation: 2023H1, FSGPLUS had a net increase of about 90,000 individual users, an increase of 4.07% over the end of 2022, with a cumulative total of 2.2875 million individual users; HRally (HRally) launched a new integrated encyclopedia, created an integrated online and offline policy information center, and expanded the policy base to 120 cities.
Investment advice: Outsource Holdings has been deeply involved in the domestic garment industry for nearly 40 years, providing one-stop human resources services. The company's business network is spread all over the country, with strong capital strength and obvious comprehensive advantages. In the company's traditional business, personnel management and talent dispatch contribute steadily to cash flow; the rise in fields such as business outsourcing and flexible employment in emerging businesses opens up room for growth. We expect the company to achieve net profit of 639/732/837 million yuan in 2023-2025, respectively. Corresponding to the current PE valuation of 21x/18x/16x, respectively, it will maintain the “increase in holdings” rating.
Risk warning: Market competition is fierce, the recovery in employment demand falls short of expectations, and policy supervision is becoming stricter.