Key points of investment
Incident: On January 31, the company released its 2023 annual results forecast. It is expected to achieve revenue of 811-835 million yuan for the full year of 2023, an increase of 35.00%-39.00%; achieve net profit of 0.55-066 million yuan, an increase of 772.77%-947.33%; and achieve net loss without deduction to mother of 0.77%-089 million yuan, an increase of 0.05-0.22 billion yuan over the same period last year. Among them, Q4 achieved revenue of 346-370 million yuan, a year-on-year increase of 38%-47%; realized net profit to mother of 0.51 to 62 million yuan, an increase of 101% to 144% year-on-year.
Overseas business keeps the company's revenue growing rapidly throughout the year. In 2023, the company rapidly expanded overseas markets through continuing to deepen its localization strategy, established new branches in Thailand and other countries and regions, and recruited localized talents in Asia, Europe, the Middle East, South America, etc., and the company achieved high growth in overseas business by increasing its layout in overseas markets. At the same time, the company's domestic business growth rate recovered significantly in 2023 compared to the previous year, mainly due to the company's “sinking small and medium-sized enterprises” and “focusing on big customers” business strategy and strengthening marketing network construction. On the profit side, the company was effective in controlling sales expenses in 2023, so net profit increased significantly compared to the previous year. In addition, the company lost net profit under non-standard deductions, mainly due to the impact of government subsidies and financial management income. It is estimated that the impact of non-recurring profit and loss on net profit in 2023 is $127-150 million, far greater than the amount of non-recurring profit and loss of $74 million in the same period last year.
The core competencies continue to be iterated, and the product matrix is further expanded through mergers and acquisitions. The company continues to invest in R&D to iterate and upgrade products. In 2023, the 2024 versions of the two major products ZWCAD and ZW3D were released. Among them, ZWCAD 2024 added key features such as variable blocks, point clouds, and DGN basemaps, and the overall operation efficiency of complex drawings was increased several times compared to the 2023 version; ZW3D 2024 added and optimized more than 230 functions, truly integrating design, simulation, and manufacturing. In addition, the company launched the 1.0 version of the Goku 3D CAD graphics platform, which now has 3D modeling, large-scale assembly, and collaborative design capabilities. In order to further expand the product matrix and enhance market competitiveness, the company completed two acquisitions in 2023, including the acquisition of Beijing Bochao, a software manufacturer specializing in the power industry, in May, and the acquisition of overseas CFD manufacturer CHAM in October, improving the company's product layout in the CAE field.
Investment advice: The company is a leading manufacturer of industrial design software. On the one hand, we are optimistic about the continuous improvement of the company's product competitiveness. On the other hand, rapid growth in overseas markets will drive the company's revenue growth rate to continue to increase. As a result, we slightly raised our original revenue forecast. At the same time, as product competitiveness continues to increase, there is still plenty of room for price increases for the company's products in the future, and gross margin is expected to increase, so we slightly raised our net profit forecast for 2024-2025. The company is expected to achieve revenue of 8.20/11.09/1,487 billion yuan in 2023-2025 (previous value of 793/10.76/1,483 million yuan), and achieved net profit of 0.58/1.65 billion yuan (previous value: 0.96/ 1.64/261 million yuan), maintaining the “buy” rating.
Risk warning: Overseas markets fall short of expectations; industry competition intensifies; channel expansion falls short of expectations; product iteration falls short of expectations.