Achieve steady growth. The company released its 2023 annual report. In 2023, the company achieved revenue of 7.281 billion yuan, up 11.98% year on year; net profit to mother of 1,424 billion yuan, up 30.50% year on year; deducted non-net profit of 1,448 billion yuan, up 26.51% year on year. In terms of gross margin, the company's comprehensive gross margin was 74.85%, an increase of 1.29pct over the previous year. Looking at Q4 alone, the company achieved revenue of 2,914 billion yuan, a year-on-year increase of 5.36%; net profit to mother of 818 million yuan, a year-on-year decrease of 24.29%; deducted non-net profit of 911 million yuan, an increase of 11.86% year-on-year. As of December 31, 2023, the company's net operating cash flow was 1,261 billion yuan, up 10.82% year on year; contract debt was 2,766 billion yuan, down 8.49% year on year.
Cost and labor efficiency control have achieved remarkable results. In terms of the three rates, the sales expense ratio was 8.11%, the management expense ratio was 13.09%, and the R&D expense ratio was 36.55%, with year-on-year changes of -1.38pct, -0.29pct, and 0.47pct, respectively.
As of December 31, 2023, the company had 13,200 employees, generating income per capita of 552,100 yuan, an increase of 13.32% over the previous year, and achieved a per capita profit of 1080 million yuan, an increase of 32.19% over the previous year. The results of cost control were remarkable.
Each segment of the business has grown to varying degrees. In terms of business segments, Fortune Technology Services, Asset Management Technology Services, and Operation and Institutional Technology Services are the company's top three businesses. 1) Fortune Technology Services: Achieved revenue of 1,734 billion yuan, an increase of 4.27% over the previous year, accounting for 23.81% of total revenue. The main reason was the slowdown in market demand for existing products, demand for credit and innovation products was not fully released, and competition intensified; 2) Asset management technology services: achieved revenue of 1,712 billion yuan, an increase of 9.27% over the previous year, accounting for 23.51% of total revenue. On the business side, O45 completed full-stack Xinchuang R&D, signed 53 new customers, and completed 24 customers. Among them, Huabao Fund completed key projects such as the O45 project. It became a good start for O45's iterative upgrading in the securities fund insurance industry; 3) Operation and institutional technology services: achieved revenue of 1,436 billion yuan, an increase of 14.32% over the previous year, accounting for 19.73% of total revenue. In terms of business, a new generation of TA signed nearly 100 new customers and completed construction with leading customers, setting an industry benchmark role; 18 Internet TAs were launched, laying the foundation for subsequent TA 6.0 promotion. 4) Other businesses also showed impressive results: Risk and platform technology services achieved revenue of 509 million yuan, an increase of 19.06% year on year; data service business achieved revenue of 385 million yuan, an increase of 19.27% year on year. In 2023, in terms of intelligent investment and research product lines, WarrenQ quickly incubated WarrenQ Chat and ChatMiner based on a self-built big model, and the number of active WarrenQ users continued to grow. Large model application products are being co-built with multiple customers.
Make first-class products and develop data intelligence. In 2023, the company adhered to the business policy of “only making first-class products”, skewed resources towards the core product line, and achieved excellent results in implementing key products. Among them, the maturity of O45 products was further improved, and projects for leading funds and asset management companies were completed; UF3.0 signed 2 new strategic customers, completed projects at 2 leading brokerage firms, and completed the launch of the memory trading version for customers. SAAS business and Hang Seng Juyuan's data services have achieved faster growth. In terms of Xinchuang, by the end of 2023, all of the company's main products had been adapted to Xinchuang, helping more than 70 financial institutions to independently innovate and upgrade their core business systems. In 2023, the company will improve data productivity, enhance transaction-level data quality, and make data more comprehensive, timely, accurate and stable. The breadth of data has been expanded, data derivation capabilities for scenarios such as investment and research, wealth, quantification, FICC, and ESG have been enhanced, and full business coverage has been achieved. In June 2023, the company released WarrenQ, the next-generation investment and research opening method, Photon, a financial intelligence assistant, and LightGPT, a major model for the financial industry. In October, the company held the 2023 Hang Seng Financial Technology Conference to announce the latest capability upgrade results and application products of LightGPT, a major financial model, and announced the official opening of public testing. We believe that in a situation where increasing investment in technology and strengthening digital transformation is the industry consensus, the company is already at the forefront of the financial model development industry, and it is worth looking forward to the implementation of AI products in 2024.
Profit forecasting and investment advice. We believe that the company will continue to refine process control and further focus on product lines to enhance product competitiveness and maintain steady growth in core business. At the same time, the company will vigorously develop AI products such as the LightGPT financial model and WarrenQ intelligent investment and research platform, which is expected to lead a new wave of digital transformation in the financial industry. We expect the company's net profit for 2024-2026 to be 17.43/21.52 billion yuan, respectively, up 22.39%/23.45%/20.15% year-on-year, and EPS of 0.92/1.13/1.36 yuan respectively, giving the company 35-40 times the 2024 dynamic PE, with a reasonable value range of 32.20-38.40 yuan, maintaining the “superior to the market” rating.
Risk warning. Large models and AI products fell short of expectations, and market competition intensified.