Incident: The company released its 2023 annual report. In 2023, it achieved operating income of 7.281 billion yuan, a year-on-year increase of 11.98%; realized net profit to mother of 1,424 billion yuan, an increase of 30.50% over the previous year; realized deducted non-net profit of 1,448 billion yuan, an increase of 26.51% over the previous year, and the performance was slightly higher than the forecast guidelines.
Wealth and asset management lines are operating steadily, and Xinchuang is successfully implemented. In 2023, the company secured resource investment in key areas to create more first-class products. All main products have been adapted to Xinchuang, helping more than 70 financial institutions to independently innovate and upgrade their core business systems. (1) The revenue of the Fortune Technology sector increased by 4.27%, UF3.0 signed 2 new strategic clients, and completed the launch of 2 leading brokerage projects; (2) the asset management technology sector increased by 9.27%, O45 completed full-stack Xinchuang R&D, and signed 53 new customers, including the completion of key projects such as Huabao Fund's O45, which is expected to drive O45 to deliver in full batches in the field of large asset management. (3) The remaining business lines are flexible in revenue growth. Revenue from enterprise finance, insurance core and financial infrastructure technology, data services, risk and platform technology, operation and institutional technology, and innovation business increased by 23.10%, 19.27%, 19.06%, 14.32%, and 12.48%, respectively.
The efficiency of operators has improved, and profitability has increased significantly. In 2023, the company's gross profit margin and net profit margin reached 74.84% and 19.56% respectively, up 1.28 pcts and 2.78 pcts year-on-year, and profitability increased significantly. The company's sales and management expenses ratio decreased by 1.38 pcts and 0.29 pcts year on year. The total number of people in the company decreased by 158 people year on year, and per capita revenue generation reached 552,100 yuan, up 13.32% year on year, and operator efficiency improved significantly.
LightGPT empowers financial businesses and accelerates commercialization with large models. In June 2023, the company released WarrenQ, the next-generation investment and research opening method, the financial intelligence assistant Photon, and LightGPT; in October, the company held the 2023 Hang Seng Financial Technology Conference to announce the latest capability upgrade results and application products of the financial model LightGPT, and announced the official opening of the public beta. In terms of the intelligent investment research product line, WarrenQ chat and chatMiner were quickly incubated based on a self-built big language model, and the number of active WarrenQ users continued to grow. Big model application products are being co-built with many customers, and a financial big model application ecosystem is gradually being formed.
Investment advice: The company is a leader in the domestic financial IT industry and will fully benefit from AI technology changes and capital market reforms. We predict that the company will achieve revenue of 81.01, 91.90, and 10.489 billion yuan in 2024-2026, and achieve net profit of 17.09, 20.06, and 2,325 billion yuan. Corresponding to current PE valuations of 25x, 22x, and 19x, respectively, maintaining a “gain” rating.
Risk warning: financial policies fall short of expectations; promotion of new products falls short of expectations; commercialization of AI falls short of expectations.