Incident: On March 27, the company released its annual report for the year 23. The company achieved annual revenue of 439 million yuan, a year-on-year increase of 30.90%, a year-on-year increase of 13.77%, after deducting non-net profit of 95 million yuan, an increase of 25.90%; single Q4 revenue of 130 million yuan, up 12.08% year-on-year, and net profit of 0.3 million yuan, a year-on-year decrease of 5.46%, after deducting non-net profit of 0.29 million yuan, a year-on-year increase of 1.57%. The 23 annual equity distribution plan was announced. It is proposed to distribute 5.2 yuan for every 10 shares transferred, for a total cash dividend of 39 million yuan. The total cash dividend accounts for 35.40% of the net profit.
The industrial Internet industry developed rapidly, and the company achieved a double increase in revenue and net profit. The company's revenue achieved rapid growth, mainly due to the rapid development of the industrial Internet industry and the gradual increase in demand in the downstream terminal application market; the smart energy/industrial internet/smart transportation/smart city sector achieved revenue of 1.77/0.97/0.77/51 million yuan respectively, up 20.99%/82.90%/51.20%/75.40% year-on-year respectively. In '23, the amortized share payment fee was RMB 10.03 million. Excluding the impact, net profit attributable to mother increased 24.49% year-on-year. In '23, the company achieved overseas revenue of 45 million yuan, an increase of 25.67% over the previous year. The company increased its overseas marketing efforts, combined several overseas related conferences and exhibitions, direct sales and distributors to accelerate the expansion of overseas market channels.
Transforming from a product type to an end-to-end full-stack product solution enterprise. In terms of product structure, the company's revenue for new solutions reached 65 million yuan in '23, accounting for 14.73% of revenue; industrial switching products, industrial gateways and wireless products increased by 21.64% and 9.32%, respectively. The company's solution performance has grown rapidly. Using HaaS as the fulcrum, it has transformed from a single communications product provider to a scenario-based software and hardware product solution provider, helping the company further enhance its order development capabilities and market competitiveness, and the company's orders remain stable and continue to increase. Due to the solution's initial market development, the gross profit margin (32.62%) was lower than that of industrial switching products (62.10%) and industrial gateway and wireless products (56.66%), and the company's gross margin fell slightly by 1.26pct to 56.94% in '23. However, the absolute value of the company's expenditure is in line with the direction of change in revenue. The sales/management/R&D/finance expense ratios were 12.82%/7.15%/13.99%/0.30%, respectively, a decrease of 0.96 pct/ an increase of 1.51 pct/ a decrease of 3.19 pct/ an increase of 0.02 pcts.
Continue to strengthen technical strength and brand power, and use AI to enable production. The company was invited to participate in the 2023 China Industrial Internet Conference hosted by the Ministry of Industry and Information Technology. At the conference, white papers such as “TSN Solution White Paper”, “5G Fully Connected Factory Construction Guide”, “TSN Network Control System White Paper”, and “Research on End-to-End Network Computing Technology Based on TSN” were released. Recently, it was shortlisted as a digital transformation diagnosis service provider, further enhancing the company's brand influence. At the same time, the company continued to focus on investment in industrial communication technology, and launched the TSN edge intelligent gateway and TSN network interface card in '23. The company has further improved AI business center capabilities, can manage edge AI computing devices more comprehensively, and further expand and optimize the functions of edge AI application configuration development tools already integrated on the central side; implemented Sanwang AIKit, a configured edge AI application development tool, and provided a configured graphical interface for users to build AI applications, enabling codeless development, one-click compilation, and one-click distribution of AI applications.
Investment advice: The company's net profit for 2024-2026 is expected to be 1.52/1.87/228 million yuan, respectively, and the corresponding PE multiples are 20/17/14x. The company is a scarce end-to-end one-stop industrial communication solution provider, and is continuously increasing its efforts to develop emerging markets and overseas markets. Maintain a “Recommended” rating.
Risk warning: Overseas business expansion falls short of expectations; market competition intensifies; industrial communications development falls short of expectations.