Hang Seng's 2023 revenue yoy +11.98%, net profit to mother yoy +30.50%, higher than forecast
Achieved revenue of 7.281 billion yuan (yoy +11.98%) in 2023, slightly higher than forecast; net profit to mother of 1,424 billion yuan (yoy +30.50%), after deducting non-net profit of 1,448 billion yuan (yoy +26.51%), higher than forecast (performance forecast: revenue of 7.292 billion yuan, net profit attributable to mother of 1.344 billion yuan, net profit of 1.378 billion yuan); since the company's cost and expense control has exceeded our expectations, the company's EPS for 24-25 was raised to 3/1.17 yuan respectively (previous value 0.89/ 1.11 yuan), adding 2026 EPS to 1.33 yuan. Comparing the company's 2024 PE with an average value of 38 times (Wind), we are still optimistic about Hang Seng's core competitiveness and future development prospects. We gave the company a target of 38 times PE in 24, a target of 35.19 yuan (previous value of 31.08 yuan), and maintained a “buy” rating.
The results of the company's expense control were remarkable in 2023. The gross margin increased year on year, and the cost ratio was reduced year on year. In 2023, the company carried out more detailed process control. On the basis of steady revenue growth, the number of employees was reduced from 13,347 to 13,189, continuing the trend of revenue growth higher than cost and expense growth. In 2023, the company's comprehensive gross margin was 74.85%, up 1.29pct year-on-year; the period cost ratio, sales expense ratio, management expense ratio, and R&D expense ratio changed (-1.65)/(-1.38)/(-0.29) /0.47 pct, respectively. Net operating cash flow was $1,261 million, up 10.82% year over year. According to the company's operating goals, the company's revenue is expected to maintain steady growth in 2024, and expenses are lower than revenue growth. Therefore, we expect the year-on-year growth rate of the company's net profit to mother in 2024 to be higher than the year-on-year revenue growth rate.
Revenue composition: Steady growth in wealth and asset management, rapid growth in institutional, risk control, data business, etc. over 23 years Revenue composition: 1) Fortune Technology: Revenue of 1,734 billion yuan (yoy +4.27%); 2) Asset Management Technology:
Revenue of 1,712 million (yoy +9.27%); 3) Operation and institutional technology services: revenue of 1,436 million (yoy +14.32%); 4) Risk and platform technology: revenue of 509 million (yoy +19.06%); 5) Data services: revenue of 385 million (yoy +19.27%); 6) Innovative business: revenue of 556 million (yoy +12.48%); 7) Enterprise capital, insurance core, etc.: revenue of $700 million (yoy +23.10%); 8) Others (revenue of $2.44 billion yoy +22.92%)
Outlook 2024: The financial IT industry is resilient, there is no need to be overly pessimistic. We believe that IT spending in the financial industry is relatively rigid: 1. The long-term positive trend in the capital market will not change, and investor-based policy orientation will bring broad development space to wealth management and asset management businesses; 2. According to the policy requirements of building a strong financial country and building first-class investment banks and investment institutions, financial institutions are expected to increase investment in technology accordingly. The China Securities Association's “Three-Year Network and Information Security Improvement Plan for Securities Companies (2023-2025)” clearly stipulates that the average investment in brokers' information technology is not less than 7% of the average revenue or 10% of the average net profit in 23-25; 3. Financial Credit Innovation has gradually entered the deep-water zone of core system replacement, which is expected to become the top priority of IT demand in 2024; 4. The emergence of technologies such as large models has brought more growth opportunities to the fintech sector.
Risk warning: Downstream prosperity falls short of expectations, industry competition intensifies, and AI product promotion falls short of expectations.