2023 results are in line with market expectations
The company's annual revenue was 5.204 billion yuan, +21.45% year on year; net profit to mother was 3.26 yuan, +28.76% year on year; net profit without return to mother was 316 million yuan, +29.34% year on year; non-net profit after excluding share payments was 362 million yuan, +65.49% year over year. 4Q23 revenue was 2.119 billion yuan, +30.61% year over year; net profit to mother was 166 million yuan, +18.26% year over year; net profit without return to mother was 154 million yuan, +16.37% year over year. The results are in line with market expectations.
Development trends
The revenue-side integration business is growing strongly, and the cash flow performance is impressive. 1) Software business: revenue of 3.322 billion yuan, +5.54% year over year, credit business winning rate of over 80%; 2) Integrated business: revenue of 1,720 billion yuan, +77.47% year over year, driving integrated business development; 3) Innovative operation business: revenue of 157 million yuan, -4.53% YoY. The company's business in Singapore, Cambodia and Indonesia continues to advance, and we believe it is expected to contribute new growth points. On the order and cash flow side, the cash flow received from sales of goods and services was 5.449 billion yuan, +25.96% over the same period last year, showing impressive performance.
Profits are gradually picking up, and investment in R&D is firm. On the profit side and expense side, the company's gross profit margin in 2023 was 25.90%, -1.08ppt year on year, due to an increase in the share of integrated businesses with relatively low gross margins. By business, the gross margin of the software/integrated business was 31.13%/10.48%, compared with +1.71/+1.40ppt, with a moderate recovery. In 2023, the company's sales/management/R&D expense ratio was 3.10%/5.81%/10.92%, year-on-year, -0.18/+0.20/-0.75ppt. The company's R&D investment was stable, focusing on data assets and large model applications.
Open up a new track for non-performing assets and consolidate the big model cooperation ecosystem. 1) Innovative business. The company signed a strategic cooperation agreement with Xiamen Asset Management to lay out the field of non-performing assets in personal loans and broaden the scope of innovative operations.
2) In the data business, the company and Starlink Technology launched a joint solution for full-factor data operation, which has already been implemented in a trillion-level commercial bank. In November, the company won the bid for a distributed relational database project for the construction of a central enterprise, achieving a breakthrough in integrated business in the non-financial field. 3) In terms of ecological construction, the company has cooperated deeply with ecosystem partners such as Smart Spectrum, Tencent, and Huawei, and fintech solutions formed with Huawei have been implemented in over 20 large commercial banks. In addition, the company launched the first batch of large-scale model application products and solutions for the financial industry, packaged its own accumulation with partner products, and launched the Usin all-in-one computer.
In 2024, the company will continue to develop software and innovative operation business, expand overseas markets mainly in Southeast Asia, strengthen product research and development, and consolidate its leading position.
Profit forecasting and valuation
Considering that the company's innovative business progress was weaker than our previous expectations, we lowered our 2024e profit forecast by 30.6% to 388 million yuan, and introduced a 2025 revenue/net profit forecast of 71.5/4.6 billion yuan. We believe that the company has a good ecological card and new business that is expected to boost business growth, maintain the industry rating, and lower the target price by 22.7% to 17 yuan. Based on 31x2024EP/E, there is 27.9% upside compared to the current stock price. Currently trading at 24x/20x 2024/2025EP/E.
risks
Demand for innovative businesses falls short of expectations, overseas policy risks, and AI deployment progress falls short of expectations.