Financial Services Association, January 23 (Reporter Wu Xin) China Software (600536.SH) disclosed this evening that it expects net profit loss of 200 million to 240 million yuan in 2023; net profit loss after deduction of 480 million yuan to 570 million yuan. This is China Software's first loss since entering the capital market in 2002.

China Software said in its performance forecast that there are three main reasons for the loss in performance: first, due to the impact of the Internet Communications market, the amount of new contracts signed fell short of expectations, revenue decreased, and profit contribution declined; second, the company continued to increase investment in major projects in tax business and other fields; and third, the company calculated impairment losses on equity investments.

Due to the concept of localization of operating systems, Chinese software frequently stirs up market nerves. According to the company's 2023 three-quarter report, Kirin Software, the leading domestic operating system, achieved operating revenue of 661 million yuan in the first three quarters, an increase of 6.27% over the previous year, and realized net profit of 129 million yuan, an increase of 152.94% over the previous year. From this, it is easy to see that although Kirin Software has performed well in the past year, it is still somewhat “difficult to support”.

The reporter noticed that in response to investors' inquiries on the interactive platform, China Software revealed that the company's R&D investment in the past 5 years has mainly focused on the three major fields of big computing platforms, large industry applications and large system engineering: “In terms of big computing platforms, we focus on building basic product lines such as operating systems, computing power platforms, and intellectual platforms to continuously enhance the competitiveness of core products; in terms of large industry applications, the focus is on building core application software products such as party and government functions, urban management, finance, and enterprises, etc., to continuously iterate to improve product performance.”

China Software's main business is divided into independent software products, industry solutions, and service businesses. Among them, industry solutions had the lowest gross margin, which was only 9.74% in 2022, yet they accounted for more than half of the company's revenue. In contrast, the gross margin of the service-oriented business belonging to the tax business was 58.51%, and the gross margin of the independent software industry was as high as 71.21%. However, the business segments to which the “three major fields” mentioned above fall are still unknown. However, restructuring business products may help the company improve its overall profit level.

However, in the short term, the business highlights of Chinese software may still come from Kirin Software. According to the latest data released on the official account of China Software's “Kirin Software”, the total number of Kirin software and hardware compatibility adaptations exceeds 4.26 million, of which there are more than 3.57 million software adaptations and over 690,000 hardware adaptations.