Introduction to this report:

The company's performance continues to be under pressure, but pessimistic expectations have largely been fully released. The company focuses on cost control, and once revenue reaches an inflection point, profits will be more flexible.

Key points of investment

The target price was lowered to 33.82 yuan to maintain the “gain” rating. According to the Company Express data, the profit forecast for 2023 was lowered. The profit forecast for 2024 and 2025 was 0.58 (-0.52), 0.84 (-0.70), and 1.20 (-0.95) yuan, respectively, due to lower government investment in information technology than expected. Referring to the average PE and PS values of comparable companies in 2024, the target price was lowered to 33.82 yuan to maintain the “gain” rating.

Downstream demand fell short of expectations, putting pressure on full-year results. The company released its 2023 performance report. It is expected to achieve total revenue of 2,444 billion yuan for the whole year, a year-on-year decrease of 13.47%, and net profit to mother of 191 million yuan, a year-on-year decrease of 66.63%. The performance is lower than expected. Among them, Q4 revenue was 1,066 billion yuan, down 13.06% year on year, and the decline was narrower than in Q3.

The external environment is still the main source of pressure, but the pessimistic forecasts are almost fully reflected. The impact of the external environment on the company is reflected not only in IT expenses, but also in the pace of bidding for other projects. The company's project business revenue has declined, while operating revenue has also been affected. Judging from the Express report data, we believe that the impact was not only reflected on the revenue side, but also a marked decline in gross margin. The company has been affected for a long time, the market is fully aware, and pessimistic expectations have been fully reflected. The company has sufficient capital reserves and is fully prepared to overcome the industry's trough.

Buck the trend and actively seek change. There is plenty of room for future profits to be repaired. The company plans to buy back the company's shares for $1-2 billion on February 20, showing confidence in future development. At the same time, the company reduced corresponding expenses during the downturn in prosperity, and expenses are expected to remain relatively stable throughout the year. On the premise that costs and expenses are relatively stable, once revenue is reversed, it will bring about greater profit flexibility.

Risk warning: Fiscal investment has declined more than expected, labor costs have risen, policy risks