1-3Q23 performance meets our expectations
The company announced 1-3Q23 results: revenue 13.96 billion yuan, up 34.07%; return net profit 476 million yuan, same increase 8.28%, in line with our expectations; deducting non-return net profit 3.72 yuan, same increase 1.78%, non-recurrent income is mainly government subsidy 170 million yuan (year-on-year increase of about 73%), highly related to outsourcing business.
On a quarterly basis, Q1/Q2/Q3 revenue increased by 40.1% and 31.0%, respectively, and net profit from home increased by 5.6%, 8.8% and 11.6% respectively, with a month-on-month increase in performance growth. Deducting non-return net profit increased by 0.8%, 2.9% and 1.3% respectively.
Trend of development
1. New businesses such as outsourcing are growing rapidly, with revenue from 1-3Q23 growing by 34%. The company's single 3Q23 revenue increased by 31.0% year-on-year / month-on-month growth of 3.9% respectively, which we think is mainly driven by emerging sectors such as business outsourcing and compensation and benefits. The company's 1H23 has added 21 compensation and benefits programs with more than 1,000 people, and the number of outsourced service employees has increased by 7%. We expect Yuanmao to continue to cooperate with customers to boost the volume growth of business outsourcing. In addition, the company continues to optimize its customer structure, with more than 60% of new customers in China in the first half of the year, and domestic customers are expected to become a new growth point.
2. The change of business structure affects profitability, and the return net interest rate is reduced by 0.8ppt. The company's 1-3Q23 gross profit margin has also been reduced by 2.2ppt to 10.5%. We believe that the proportion of revenue from outsourcing services mainly due to low gross margin has increased rapidly. During the 1-3Q23 period, the expense rate was also reduced to 6.1% by 1.2ppt, and the scale effect continued to appear, in which the sales expense rate was reduced to 3.9%, the management + R & D expense rate was reduced to 2.8% by 0.4ppt, the digital construction was further invested, and the financial expense rate was increased by 0.4ppt to-0.7%. Under the combined influence, the company's 1-3Q23 net interest rate also fell by 0.8ppt to 3.4%, and profitability declined under the influence of structural factors.
3. The service capacity has been continuously strengthened and the digital transformation has been promoted. The company actively distributes its global service network. By the end of June, it has set up 27 holding subsidiaries and 170 + direct branches outside its headquarters in Shanghai. FSG-TG has established a business service partnership with its European and North American counterparts, serving a total of 50 countries and regions. In addition, the company also continues to build a digital ecology, and the foreign service cloud platform speeds up the creation of cloud physical examination projects and launch digital business cards, enabling first-line sales, with the number of individual users reaching 2.2875 million as of the first half of the year; business backup platform speeds up the integration of innovative technologies, improve the application rate of electronic signatures, promote directly connected projects in the social network hall, and improve the level of informationization and intelligence.
Profit forecast and valuation
Maintain the net profit forecast of 614 pounds in 2024, and the current share price corresponds to 16 times the net profit of 2023 pounds in 2024. Maintain an outperform industry rating and target price of 7 yuan, corresponding to 2023, 2024, 26 picks, 22 times PPPink E, 34% upside compared to the current stock price.
Risk
The industry competition aggravates the risk and the risk of macroeconomic fluctuation.