Investment event: On March 24, the company released its 2023 annual report. The company achieved operating income of 7.281 billion yuan, an increase of 11.98%; realized net profit attributable to shareholders of listed companies of 1,424 billion yuan, an increase of 30.50% year on year; realized net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss of 1,448 billion yuan, an increase of 26.51% year on year.
Profitability continued to increase, and net profit to mother was higher than forecast. In 2023, the company achieved operating income of 7.281 billion yuan, an increase of 11.98%; achieved net profit attributable to shareholders of listed companies of 1,424 billion yuan, an increase of 30.50% year on year; realized net profit attributable to shareholders of listed companies of 1,448 billion yuan, an increase of 26.51% year on year. The profit side was significantly higher than the performance forecast (performance forecast: net profit to mother was about 1,345 billion yuan, an increase of about 23.27% year on year; net profit without return to mother was about 1,378 billion yuan, up about 20.38% year on year). By business, the company's revenue mainly comes from the Fortune Technology service business and the asset management technology service business. Among them, the Fortune Technology service business achieved 17 revenue.
The asset management technology service business achieved revenue of 3.4 billion yuan, an increase of 9.27% year on year; all other business lines achieved double-digit growth, showing the resilience of business operations.
Gross margin increased steadily, and cash flow picked up in the Q4 quarter. In 2023, the gross margin of the company's main business was 74.85%, up from the past two years, and continues to maintain market leadership and product competitiveness advantages. The company's refined management is further evident. The company's sales/management expenses ratio in 2023 decreased by 1.38%/0.29%, respectively, compared with last year. In the Q4 quarter alone, net cash flow from the company's operating activities picked up, reaching 2,041 billion yuan, an increase of 17.50% over the previous year.
AI+ Xinchuang two-wheel drive, and the company actively seeks “more growth opportunities”. Currently, China's AI industry has entered a period of rapid development. The company released LightGPT, the financial intelligence assistant Photon, and WarrenQ, an intelligent investment and research platform. Large model application products are being co-built with many customers to seize AI opportunities. In terms of Xinchuang, all of the company's main products have been adapted to Xinchuang, helping more than 70 financial institutions to independently innovate and upgrade their core business systems; in the operation of the Xinchuang ecosystem, they have signed contracts with relevant strategic partners and published the “White Paper on Information Technology Application Innovation in the Financial Industry”.
Investment advice: Based on the annual report issued by the company, we have adjusted the profit forecast for 2024 and 2025, and added 2026. It is predicted that the company's revenue for 2024-2026 will be 78.22/85.46/9.557 billion yuan (2024-2025 will be 79.12/8.742 billion yuan, respectively), and net profit to mother will be 15.81/17.74/2.011 billion yuan (2024-2025, respectively), corresponding PE will be 28/25/22 times, respectively, maintaining the “buy” rating.
Risk warning events: business development falls short of expectations, slow policy advancement, intensification of industry competition, etc.