Event: The company released its 2023 three-quarter report. The first three quarters achieved revenue of 11.052 billion yuan (+2.16% year-on-year), net profit of 303 million yuan (-45.07% year-on-year), gross profit margin of 35.63% (+1.10pct), and net profit margin of 4.64% (y-3.05pct). 23Q3 has quarterly revenue of 4.083 billion yuan (-0.99%, +12.88%), net profit of 105 million yuan (-5.6.38%, -10.96%), gross profit margin of 36.47% (+0.81 pct, month-on-month), and a net profit margin of 4.63% (y-4.29pct, month-on-month -0.22pct).
Subsidiaries Shengteng Information and Ruijie Network maintain leadership in the ICT field. According to the Fujian State-owned Assets Administration Commission citing the IDC2023 market tracking report for the first half of the year, Shengteng ranked first in the Asia Pacific thin client market in the first half of the year, and also ranked first in the Chinese thin client market; the TCI cloud terminal market still performed well, ranking first in market share in China; and VDI cloud terminals are deeply involved in the industry market and continue to be number one in the Chinese market. Ruijie Network ranked first in China's local computing IDV cloud desktop market share; China's Ethernet switch market share ranked third; China's data center switch market share ranked third; and China's wireless WLAN market share ranked third.
Continue to strengthen the digital foundation and add AI and Harmony. AI vision devices unveiled at the World Manufacturing Conference. Starnet Yuanzhi, a subsidiary of the company, brought AI visual inspection equipment and AI visual assembly equipment to the “Digital Economy and Artificial Intelligence Zone”. The subsidiary Starnet IoT and Shenzhen Kaihong signed a strategic cooperation agreement to jointly create an open source Hongmeng scenario solution. Starnet IoT will leverage industry advantages such as products, solutions, channels, and experience in the fields of smart banking, smart insurance, smart campuses, smart medical care, etc., and Shenzhen Kaihong will utilize the “Kaihong Security Digital Dock” technology accumulated and rich experience based on KaiHongOS and the super equipment management platform to jointly create vertical industry solutions and achieve business implementation of solutions in various industry scenarios.
Investment in R&D continued to increase in the first three quarters of 23 years. The company's R&D expenses for the first three quarters of 23 years were 1,834 billion yuan, +23.54% year-on-year, and the R&D expenditure rate was 16.60%, +2.87pct year-on-year. The management, sales, and financial expenses for the first three quarters were 4.75% (+0.96pct), 13.00% (yoy +1.23pct), and -0.01% (yoy +0.59pct), respectively.
Profit forecasts and investment advice. We estimate that the company's revenue for 2023-2025 will be 16.820 billion yuan, 19.822 billion yuan, and 22,678 billion yuan respectively; net profit will be 533 million yuan, 783 million yuan, and 919 million yuan respectively, corresponding to EPS of 0.90 yuan, 1.32 yuan, and 1.55 yuan, respectively. Referring to comparable companies, the 2023 PE range was 20-23 times, corresponding to the reasonable value range of 17.98-20.67 yuan, a “superior to the market” rating.
Risk warning. Technology risks; market demand falls short of expectations; product competition increases risk.