The company published its annual report for the year 23. The company achieved revenue of 5,060 billion yuan in '23, or 9.35% year-on-year, and net profit to mother of 1,020 billion yuan, or 23.90% year-on-year. Among them, 2023Q4 achieved revenue of 1,066 billion yuan, or 16.72% year-on-year, and realized net profit of 193 million yuan, or 138.02% year-on-year. At the same time, the company announced a cash dividend of 23 yuan for every 10 shares, with a dividend rate of 98%, corresponding to a dividend rate of 4.5%.

Feike upgraded, and vPro undertook it. The company continues to promote the high-end upgrading of the Feike brand and the orderly acceptance of the sub-brand vPro. For the whole year, vPro achieved revenue of 870 million yuan, an increase of 115% over the previous year, accounting for 17% of revenue. vRui is positioned as a cost-effective brand and is expected to become a new growth point for the company.

High-end upgrades, a reduction in the proportion of outsourcing, and an increase in the share of direct management drive an increase in gross margin. The company's gross margin increased by 3.47pp to 57.10% year on year in 2023. The main reasons for the increase in the company's gross margin are: 1) the company's high-end product sales ratio increased by 6pp to 51% year on year in 23; 2) the company's outsourcing ratio further decreased by 13pp to 32%; 3) the company's direct operating ratio increased and direct gross margin remained stable. The company continued to promote product iteration and increase marketing investment throughout the year. Sales expenses increased by 4.5pp to 29.19% year on year. At the same time, the company obtained high-tech enterprise certification, and the income tax rate was reduced by 15%. Ultimately, the company's annual net profit margin increased 2.36pp to 20.15% year over year.

Profit forecasting and investment advice. The company continues to upgrade its products to drive Feike's brand upgrade. The vPro brand undertakes the cost-effective price segment, and the company's revenue side is expected to continue to grow steadily. We expect the company to achieve EPS of 2.63 yuan, 2.89 yuan, and 3.22 yuan respectively in 2024-26. Referring to comparable company valuations, the company will be given a PE valuation of 22-25 times in 2024, with a corresponding reasonable value range of 57.86-65.75 yuan, maintaining a “superior to the market” rating.

Risk warning. Demand for terminals fell short of expectations, and market competition intensified.