Core views:

The company released its annual performance report for the full year of 23: total revenue of 540 million yuan, an increase of 44.4% year on year; net profit attributable to mother was -2.70 yuan, compared to -271 million yuan in the same period in '22; net profit after deducting non-return to mother was -320 million yuan, compared to -310 million yuan for the same period in '22.

The revenue growth rate exceeded expectations, and the characteristics of crossing the cycle were once again verified. In 2023, the company's revenue growth rate was 44.4%, exceeding market expectations. We mentioned in our January 21, '24 industry report “Computer Industry: AI Computing Power and Industrial Software to Continue to Be Verified” that “the case of Starlink Technology's implementation at Bank of Ningxia validates our underlying logic of high revenue growth and sustainability, that is, downstream customers continue to re-purchase their big data products due to increased data volume and business upgrades.” The big data products developed by the company are basic software for the digital transformation of various industries. Their demand is mainly related to customer data volume and business upgrades. This characteristic reflects the cyclical nature of being verified once again during 23 years of high revenue growth.

The share of software revenue continues to rise, leading to an increase in gross margin. According to the 2023 earnings forecast previously released, the company's gross margin increased further in '23, mainly due to the continued increase in software product revenue share and service gross margin. We believe that in the future, as the degree of standardization of the company's software increases, its share of revenue is expected to increase, leading to a steady increase in gross margin.

Profit forecast and investment advice: The estimated revenue for 23-25 is 540 million yuan, 690 million yuan, and 90 billion yuan, respectively. We selected US stocks MongoDB, Snowflake, and Elastic as comparable companies from the perspective of business fields and business models. Compared with the three companies, Starlink Technology has developed more product categories and has a larger target market space. Furthermore, considering the scarcity of A-share big data companies and the future development prospects of AI software tool products, we gave the company a 24-year PS valuation of 16 times, corresponding to a reasonable value of 91.51 yuan/share per share, maintaining a “buy” rating.

Risk warning: the layout of the big data industry by technology giants and the risk of increased competition in the industry; the risk of large R&D investment and uncertainty in the transformation of results; the risk of uncertain investment in digital transformation in downstream applications.