Key points of investment
Yuxin Technology announced its 2023 annual report. Net profit attributable to shareholders of the parent company was RMB 5.204 billion, up 21.45% year on year; net profit attributable to shareholders of the parent company was RMB 326 million, up 28.76% year on year; net profit after deducting payment of shares was RMB 316 million, up 29.34% year on year; net profit after excluding share payments was 362 million yuan, up 65.49% year on year. Net cash flow from operating activities reached 447 million yuan, an increase of 155.08% over the previous year.
Fourth quarter: Operating income of 2.119 billion yuan, up 30.61% year on year; net profit attributable to shareholders of the parent company was 166 million yuan, up 18.36% year on year; net profit after deducting net income from mother was 154 million yuan, up 16.37% year on year.
By business, the gross profit of the software business increased, system integration revenue increased, and the innovative business maintained a high gross margin of 3.322 billion yuan, up 5.54% year on year; new orders increased 5% year over year; gross margin was 31.13%, up 1.71 pct from the same period last year. The increase in gross profit is mainly due to the use of new technologies such as AI to improve development efficiency, and to strengthen the digital management of customers and projects. In terms of software revenue by customer, large state-owned commercial banks and joint stock banks accounted for 51.04%; small and medium-sized banks and agricultural credit cooperatives accounted for 33.95%; and non-bank financial institutions, foreign banks, and other financial customers accounted for 15.01%.
The system integration business revenue was 1,720 billion yuan, an increase of 77.47% year over year. Among them, the China CITIC Bank contract confirmed revenue of 388 million yuan in 2023. The gross margin of system integration was 10.48%, up 1.40pct from last year.
Revenue from the innovative operation business was 157 million yuan, down 4.53% year on year, and gross margin was 84.13%, maintaining a high gross profit trend.
The company that developed the first batch of financial industry model application products and solutions independently developed and launched the first batch of financial industry model application products and solutions, including 4 application-level products and 1 development platform, namely: development assistant CodePal, financial data security classification assistant DataSherpa, AI+ Credit Assistant (customer due diligence), AI+ marketing assistant, and big model application development platform.
At the same time, the Usin all-in-one computer was launched. Generative AI can improve the company's own product development efficiency, empower financial customer business, and enhance product competitiveness.
Overseas markets are progressing steadily
Overseas banks have a good IT pattern and plenty of profit space. The company continues to advance overseas. Existing projects have been tested online, and orders for the second and third phases have been signed. The two operating businesses in Indonesia have entered a stable period of operation and are generating revenue.
In terms of strategy, on the one hand, the company integrates and innovates with advanced technology from ecological partners. Furthermore, on the basis of in-depth research on overseas market needs, regulatory policies, and user habits, the company focuses on segmented scenarios to provide overseas customers with one-stop fintech solutions covering consulting planning, product solutions, delivery and implementation, and business operations.
Profit forecasting and valuation
We expect the company's revenue in 2024-2026 to be 61.92, 74.91, 8.616 billion yuan, up 18.99%, 20.98%, and 15.02% year-on-year. Net profit attributable to mother was 387 million yuan, 5.04 million yuan, and 651 million yuan, up 18.67%, 30.39%, and 29.14% year over year. The corresponding 2024-2026 PE is 25, 19, 15 times.
Risk warning
Risk of cooperation falling short of expectations; risk of policy changes; risk of market space falling short of expectations; competition risk