2023 results are largely in line with market expectations

The company's revenue for 23 years was +35% to $430 million, net profit +102% to $310 million, net profit after deducting +38% to $290 million (mainly excluding investment income and other earnings effects), and earnings per share of 2.38 yuan, which is basically consistent with the performance report and in line with market expectations. In addition, the company plans to pay a dividend of 8 yuan for every 10 shares and increase 4 shares for every 10 shares of all shareholders using capital reserve.

Development trends

B-side business revenue grew steadily, while C-side revenue increased slightly. The company's revenue for 23 years was +35% to $430 million, of which: 1) Total revenue from B-side securities trading system sales and maintenance services was +44% to 360 million yuan (software sales/software maintenance service revenue +76%/+15% to 21/150 million yuan, respectively). On the one hand, the company's business for B-side institutions such as brokerage firms was stable in a volatile market environment. On the other hand, it also benefited from the company's active promotion of domestic commercial cryptographics-related information security systems and some Xinchuang products deployed and launched in major brokerage firms, bringing various sub-product module operations Revenue growth. 2) Revenue from C-side securities information services was +3.4% year-on-year to 69.59 million yuan, accounting for -5ppt to 16% year-on-year revenue. In terms of key operating indicators, cash received from sales of goods and services in '23 was +26% to 450 million yuan, and contract liabilities and advance accounts receivable were -9% year-on-year to 130 million yuan.

The gross margin increased further, and the profit side grew steadily. The company's gross margin in '23 was +1.8ppt to 85.5% year-on-year, mainly because the company expanded its business rapidly while increasing cost control. In terms of expenses, the sales expense ratio remained flat at 2.3% year on year, and the management expense ratio was -0.8ppt to 2.3%; R&D expenses were +6.6% compared to the same period, and the corresponding cost ratio was 17.4%, mainly due to the increase in R&D personnel remuneration and the increase in direct investment in R&D. In addition, investment income (investment income & profit and loss from changes in fair value) turned a profit of 18.77 million yuan (loss of 68.99 million yuan in the same period last year), with financial revenue of -12% to 46.32 million yuan, mainly due to a decrease in bank large deposit and term deposit balances in the company's cash management combined with an increase in interest expenses; operating profit after excluding investment income and financial revenue was +56% to 290 million yuan.

Focus on the main business to enhance core competitiveness, and increase external strategic cooperation & own investment to deepen scientific and technological innovation. The company has consolidated its dominant position in the field of securities market trading systems. In the future, it plans to further increase investment in the development and sales of bond market products, accelerate the construction of all types of financial database systems, and strive to form new growth points. At the same time, the company announced that it recently signed a strategic cooperation agreement with Tencent Cloud. In the future, it will enhance related technology and product capabilities in various fields such as business cloudization, industry customer development, user experience improvement, C-side operation, and AIGC scenario applications. In addition, in 2024, the company plans to launch Qiaoda V2.0. This product is based on the semantic analysis capabilities of a large model and supports dialogue functions for the financial sector; at the same time, the company plans to launch products such as AI reading assistants and research report writers to further enrich the AI product matrix.

Profit forecasting and valuation

We have kept our profit forecast for 24/25 largely unchanged. The company is currently trading at 37x/29x 24/25ep/e; considering the impact of investment income and financial revenue on valuation, the target price was lowered by 24% to 145 yuan, corresponding to 50x/39x 24/25e P/E and 35% upward space; maintaining an outperforming industry rating.

risks

Stock market activity declined, business and customer structures were unified, and securities information system supervision became stricter.