The company predicts a year-on-year increase of 172.8%-230.5% in 2023, Wangsu Technology released the 2023 performance forecast: net profit for the whole year is expected to be 52-63 million yuan, up 172.8%-230.5% year on year; after deducting non-net profit of 34-450 million yuan, an increase of 91.8%-154.3% year on year.
In the fourth quarter of a year, net profit attributable to mother was 0.94 to 204 million yuan, up 516.4%-1235.4% year on year, 43.7% to +22.0% from 3Q23; after deducting non-net profit of 0.43 to 153 million yuan, up 38.6%-394.1% year on year, and -60.3% to +41.3% month on month compared to 108 million yuan in 3Q23. Benefiting from domestic and overseas market development, profit performance exceeded market expectations.
Key points of interest
Domestic and foreign markets are being promoted simultaneously with high quality. 1) Domestic competition clearly drives the improvement of the pattern, adhering to a market strategy that balances revenue and profit, maintaining the size of the business platform and improving operational efficiency; 2) We expect the share of overseas market revenue to continue to increase, driving a significant improvement in gross margin. The gross margin of 1-3Q23 companies will increase by 5.7ppt to 30.7% year-on-year. We expect the trend of quarterly gross margin repair to continue throughout the year; the company grasps the development dividends of domestic Internet companies going overseas to the Southeast Asia and Middle East markets, and maintains a leading position with the advantages of large and medium-sized customer base positioning, high-quality products and service models, and third-party neutrality. Promote the transformation of the CDN business to edge computing power platforms and expand potential market space.
Excluding the impact of non-current accounts, net profit for the full year and fourth quarter increased significantly year over year. The company expects non-recurring profit and loss of approximately RMB 183 million in 2023, mainly financial benefits, government subsidies, and investment income of 54 million yuan obtained by the company from the sale of shares in the Russian subsidiary CDNV. The company announced the 2023 restricted stock incentive plan in August. We expect the median net interest rate to be +8.3ppt to 12.4% year-on-year after excluding the impact of equity incentive fees (about 30 million yuan) for the whole year, and +4.8ppt to 8.7% yoy after deducting the median non-net interest rate. We expect 4Q23, after excluding the impact of equity incentive expenses (about 30 million yuan), to be about 180 million yuan, up 783.3% year on year, corresponding net interest rate to mother (assuming 4Q23 revenue is basically the same year on year) +11.8ppt to 13.3% year on year, and -0.7ppt month on month; the median net profit after deducting net profit is about 130 million yuan, corresponding to a 255.8% year-on-year increase, corresponding to +6.8ppt to 9.5% month-on-month.
Profit forecasting and valuation
Maintain outperforming industry ratings. Considering that the company adheres to a profit priority strategy, the domestic revenue growth rate is expected to slow down by 4.4%/2.0% of 2023/24 revenue to 48.6/5.23 billion yuan; considering fluctuations in other profit and loss items (the sale of subsidiaries received one-time investment income in 2023), net profit to 2023 was raised 4.3% to 580 million yuan (corresponding to the median forecast), and the 2024 net profit margin was lowered by 5.0% to 620 million yuan. Introduced 2025 revenue of 5.67 billion yuan and net profit of 760 million yuan. Maintaining the target price of 9.4 yuan (valuation switched to 2024, based on 37x 2024 P/E), the current stock price corresponds to 2024/25 29x/23xP/E, with 30% upside.
risks
Competition in the CDN market intensified, and new business expansion fell short of expectations.