The company's revenue and net profit to mother increased by 21.45% and 28.76% year-on-year respectively in 2023; net profit to mother of $326 million, yoy +21.45%; net profit after deducting non-net profit of 316 million, yoy +29.34%; net non-net profit of 362 million yuan after excluding share payments, yoy +65.49%, representing 45.81 million share payment expenses in '23; net operating cash payments of 25.69 million in '22; Traffic was 447 million, yoy +155.09%. In view of the intensification of competition in the banking IT industry, we lowered the company's 2024-2025 EPS to 0.57/0.71 yuan (previous value: 0.71/0.92 yuan), and added the 2026 EPS forecast to 0.86 yuan, corresponding PE 23/19/15 times, respectively. Comparable to the company's 2024 average PE is 26 times (Wind), giving the company a 2024 target PE 26 times (previous value of 19.83 yuan), giving it a purchase rating.
23 years: The software business grew steadily, system integration grew rapidly, and the innovative business declined slightly. Revenue composition in 2023:1) Software development and services: revenue of 3.322 billion yuan, yoy +5.54%, of which large state-owned banks and stock banks accounted for 51.04%, small and medium-sized banks and agricultural credit cooperatives accounted for 33.95% of revenue, and non-bank finance, foreign banks and other financial customers accounted for 15.01%; 2) System integrated sales and services: revenue of 1.72 billion yuan, yoy +77.47%; 3) Innovative operation: revenue of 1.72 billion, yoy +77.47%; 3) Innovative operation: revenue of 1.72 billion, yoy +77.47%; 3) Innovative operation: revenue of 1.72 billion, yoy +77.47% YOY -4.53%; 4) Other business: revenue of 4.621,000, YOY +30.04%. The company's comprehensive gross profit margin of 25.94%, yoy-1.07pct, is an effect of the increase in the share of integrated revenue with low gross margin. Among them, the gross margin of software/integration/innovation businesses changed by 1.71/1.40/ (-1.59) pct year-on-year, respectively. The company's period expense rate/sales expense rate/management expense rate/R&D expense ratio changed year-on-year (-1.01)/(-0.18) /0.21/ (-0.75) pct, respectively.
Banks require more customized IT service capabilities. The banking IT industry will enter a period of integration and differentiation. Demand for digital transformation in the banking industry will continue to be strong in 2023, but at the same time, it will also place higher demands on the customized services and governance capabilities of IT service providers. It is expected that in the next three to five years, the banking IT industry will enter a period of integration and differentiation, and the advantages of leading manufacturers will become more obvious. In 2023, Yuxin actively selected high-quality projects. With product advantages such as credit, data, channels, and supervision, new software orders in 2023 increased 5% year-on-year. At the same time, the company has increased its business layout such as financial credit innovation, overseas markets, and innovative operations, with remarkable results.
The company's three major opportunities in 2024: Financial Credit Innovation, full overseas expansion, and generative AI companies will increase their investment in financial credit venture capital starting in 202H2. As Financial Credit Innovation moves from general business to core business, Financial Credit Innovation will continue to be one of the company's most important industry opportunities in '24. The company's overseas business has begun to harvest. Solutions such as digital credit, scenario finance, and digital channels have received good feedback in the Southeast Asian market, won relevant orders, and is expected to achieve rapid growth in 24 years. Through cooperation with Big Model Company, the company pioneered the launch of the first batch of large-scale model application products and solutions in the financial industry, including 4 application-level products and 1 development platform, and also launched the Usin All-in-One PC. Generative AI in 2024 will bring the company more business opportunities to reduce costs and increase efficiency.
Risk warning: Banks' IT spending falls short of expectations; the pace of credit innovation falls short of expectations; market competition intensifies.