Key points of investment
Steady growth in revenue and continuous improvement in profits
According to the performance report, the company's revenue in 2023 was 148.6 billion yuan, up 5.6% year on year, and the growth rate was 0.6 pp higher than in '22, of which service revenue was 143.4 billion yuan, up 6.1% year on year; net profit was 3,584 billion yuan, up 6.7% year on year, and the growth rate continued to be higher than revenue growth. The company's profitability increased in the past two years, showing an inflection point. Gross margin increased for two consecutive years, reaching 11.6% in 2023, an increase of 0.2 percentage points; net interest rate of 2.4%, which remained steady and rising; and ROE was 8.6%, an increase of 0.1 percentage points over the previous year.
The three major businesses and the three major markets are progressing steadily
The TIS business is the cornerstone of revenue, the BPO business remains stable, and the ACO business is the main driver of growth.
TIS's revenue was 76.137 billion yuan, up 4.4% year on year, accounting for 51.2% of revenue. Among them, the high-value consulting and design business grew rapidly, driving an effective increase in the profitability of the TIS business sector.
BPO revenue was 43.551 billion yuan, up 1.1% year on year, accounting for 29.3% of revenue, and remained stable overall.
ACO benefited from the digitalization needs of the industry and achieved revenue of 28.927 billion yuan, an increase of 16.8% over the previous year, accounting for 19.5% of revenue. Among them, software development and system support maintained rapid growth, with a year-on-year increase of 25.1%.
The operator market is growing steadily, the customer attraction market is leading the rise, and the overseas market is gradually improving.
The telecom operator market contributed 81,726 billion yuan in revenue, an increase of 4.7% over the previous year. In the future, the company will continue to follow the needs of operator computing power construction and production volume business development based on the “CAPEX+OPEX+ Smart Application” development strategy, give full play to the turnkey capabilities and integrated service advantages, and help the operator market grow steadily.
The non-operator customer attraction market led overall revenue growth, achieving annual revenue of 63.433 billion yuan, an increase of 6.3% over the previous year. The company focuses on customer needs in the government, Internet and IT, energy and electricity, construction, transportation and other industries, and continues to improve service capabilities and delivery quality, which is expected to drive both revenue and efficiency improvements in this market.
The overseas market achieved rapid growth throughout the year, with revenue reaching 3.456 billion yuan, an increase of 15.3% over the previous year. In the future, the company will continue to deeply cultivate the four major regions of Asia Pacific, the Middle East, Africa and Latin America, steadily promote the implementation of overseas projects, and promote continued steady, moderate and positive overseas revenue.
Deeply cultivate new fields of war and cultivate momentum for transformation
In the context of digital China construction, the company focuses on strategic emerging fields such as digital infrastructure, green and low-carbon, smart cities, emergency safety, etc., to promote overall business transformation and upgrading, and cultivate new momentum and advantages for future development. In 2023, the amount of new contracts signed from strategic emerging fields increased by more than 30% year-on-year, accounting for nearly 30% of the total amount of new contracts signed, an increase of about 5 percentage points over the previous year. The rapid expansion of strategic emerging businesses is expected to continue to drive good growth in the company's TIS and ACO businesses.
Good cost control helps improve operating efficiency
In 2023, the company's operating costs were 131,358 billion yuan, up 5.3% year on year, accounting for -0.3pp, of which direct labor costs accounted for -0.3pp, material costs accounted for +1.2pp, subcontract costs accounted for -0.4pp, depreciation and amortization and others accounted for -0.3pp. The company's gross margin rebounded for two consecutive years, rising to 11.6% in 23 years. Among them, the gross margin of the operator market rebounded steadily, and the gross margin of the customer collection market continued to improve.
The company focuses on optimizing the structure of cost investment, actively controls administrative expenses, and gradually increases investment in R&D.
In 2023, the company's SG&A expense ratio was 10.0%, up 0.1 pp from the previous year. Among them, the R&D expenditure rate increased to 3.7%, an increase of 0.2 pp over 2022. The SG&A share after deducting R&D expenses maintained a downward trend.
In the future, the company will continue to strengthen overall cost control and structural optimization, focus on reducing costs, improving quality and efficiency, and is expected to promote continued stability, moderation and improvement in operating efficiency.
The dividend rate increased to 42% in '23, and the dividend return is attractive. The company adheres to the dividend policy of “continuous growth and steady increase”. The dividend per share in 2023 was RMB 0.2,174, up 12.1% year on year, and the dividend ratio further increased to 42%, up 2 percentage points year on year. Taking into account the performance of “steady growth and strong resilience”, combined with dividend returns that have increased year by year, the company as a whole has good investment appeal.
Profit forecasting and valuation
Revenue is expected to grow at 5.1%, 4.7%, and 4.4% in 2024-26, and net profit growth rates of 5.7%, 5.1%, and 4.7%, maintaining the “buy” rating.
Risk warning
The digital economy fell short of expectations, operators Capex and Opex fell short of expectations, industry competition intensified, dividend payments fell short of expectations, etc.