Affected by fluctuations in capital market sentiment in the short term, companies that are optimistic about AI technology will release annual reports. In 2023, they will achieve revenue of 11.081 billion yuan (yoy -11.25%), net profit of 8.193 billion yuan (yoy -3.71%), and deduct non-net profit of 7.862 billion yuan (yoy -4.18%). Among them, Q4 achieved revenue of 2,593 billion yuan (yoy -11.33%, qoq -5.30%) and net profit of 1,985 billion yuan (yoy +3.62%, qoq +0.01%). The decline in performance was mainly due to a decline in revenue due to fluctuations in capital market sentiment, and the company continued to increase investment in R&D. Considering the impact of increased cost investment, we expect the company's EPS in 2024-2026 to be 0.58, 0.65, and 0.73 yuan respectively (previous value of 0.65 and 0.75 yuan in 2024-2025). Comparatively, the company Wind agreed to expect an average PE value of 28.4 times in 24, giving the company 28.4 times PE in 24 years, with a target price of 16.50 yuan (previous value of 20.42 yuan), and a “purchase”.
Increase the share of brokerage business and pay attention to the recovery in market sentiment
By business, revenue from securities services in 2023 was 7.193 billion yuan, down 8.4% year on year, revenue from financial e-commerce services was 3.625 billion yuan, down 16.2% year on year, revenue from financial data services was 198 million yuan, down 13.1% year on year, and revenue from internet advertising services was 64 million yuan, down 14.4% year on year. The company's revenue declined due to factors such as the buoyancy of the capital market. During the reporting period, the share base transaction volume of Dongfang Wealth Securities was 19.27 trillion yuan (19.24 trillion yuan in the same period last year), the brokerage business market share further increased, credit business developed steadily, and the scale of asset management increased steadily. In terms of fund business, equity funds/non-monetary funds accounted for 14.5%/12.1% of the top ten holdings, +0.4/-0.4 pct year-on-year. We believe that in the future, market sentiment will pick up or drive the company's main business back to growth.
Strengthen AI capacity building and create new momentum for growth
In 2023, the company's sales/management/R&D expense rates were 4.22%/20.90%/9.75% respectively, up 0.01/3.34/2.26pct year-on-year, and R&D investment continued to increase. In 2023, the company consolidated and strengthened R&D capabilities, formed an artificial intelligence division, focusing on strengthening AI capacity building and actively exploring the application of large models in various financial scenarios. In January 2024, the “Mianxiang” financial model independently developed by the company officially began closed testing. With its data characteristics and algorithm advantages, the “Miaoxiang” financial model focuses on the continuous optimization of financial vertical capabilities in core financial scenarios, and is being integrated into the company's product ecosystem in an orderly manner. We believe that in the future, as related AI functions continue to improve the user experience, it is expected to create new growth momentum for the company.
Good business foundation, optimistic about long-term development prospects
According to the company's annual report, as of February 26, 2024, the company has completed share repurchases, with a cumulative repurchase amount of nearly 1 billion yuan. At the same time, the board of directors held a meeting to adjust all repurchased shares to be used for cancellation and to reduce the company's registered capital. We believe that the company's share buyback shows management's confidence in long-term development. The market share of the company's brokerage business has increased, the fund business has a good business foundation, and is actively embracing the wave of AI technology. We are optimistic about the company's long-term development prospects.
Risk warning: the risk that trading volume will continue to shrink; the progress of AI product implementation falls short of expectations.