Key points of investment
Performance summary: The company achieved operating income of 82.4 billion yuan (RMB, same below) in 2023, +0.4% year over year after the company re-listed the 2022 financial data; net profit to mother was 448 million yuan, +41.7% year on year; after adding items such as accrued interest on contingent liabilities in previous years, adjusted net profit of 448 million yuan, +9.8% year over year. Operating cash flow continued to flow in for 5 years, reaching 471 million yuan in 2023, +80% over the same period last year.
Business structure+ management efficiency optimization, profit margin improvement: in 2023, the company's gross margin was 3.3% /+0.1 pct; net sales margin was 0.8%, +0.1 pct year on year. The increase in the company's profit margin benefits from: ① business structure optimization, and faster revenue growth in SaaS businesses with higher profit margins; ② optimization of the trading business product structure, and the company actively reduced businesses and products with low profit margins. The company's sales/management expenses ratio was 1.7%/0.5%, respectively, which remained the same as in 2022.
Trading business: The main category of consumer electronics increased, and gross margin growth: The trading sector was the company's main source of revenue. In 2023, the company's trading business revenue reached 81,618 billion yuan, +0.5% year over year; gross margin was 2.5%, +0.2 pct year on year. The improvement in gross margin was obvious, while revenue growth was slowing down, reflecting the company's focus on improving the business structure in the trading sector to optimize profit margins and turnover efficiency. Looking at the classification, revenue from consumer electronics/agricultural materials/home appliances/transportation was 449/123/123/76 billion yuan, +19.0%/-22.3%/-11.5%/-6.5% compared with the same period last year.
Service sector: The gross margin has increased significantly, and merchant solutions actively optimize low-margin businesses: The company's service sector includes store SaaS+ subscriptions and merchant solutions. Revenue in 2023 was 562 million yuan/93 million yuan, respectively, +5.3%/-64.5% YoY. The SaaS+ business is an important growth point for the company. In 2023, the total number of subscribers was 132,000/+15.6%, the number of paid users was 481,000/+61.4%, and the payment rate reached 36.5%/+10.4pct. In 2023, the company launched a new package with lower fees to increase customers' willingness to pay, so the customer unit price dropped but the number of subscribers increased dramatically.
Profit prediction and investment rating: Huitongda Network is a leading B2B e-commerce company in the sinking market. The company provides supply chain and SaaS+ services for a large number of sinking retail stores. Considering the macro-level impact of consumer demand and the impact of the company's operating structure, we lowered our revenue expectations and raised our profit margin expectations. We reduced the company's net profit forecast for 2024-25 from 666/81 million yuan to 60/ 780 million yuan, and added the 2026 net profit forecast to be 980 million yuan; the 2024-26 year-on-year increase was 35%/30%/25%, and the P/E corresponding to the closing price on April 2 was 27/ 21/ 16 times, maintaining the “buy” rating.
Risk warning: Member store development and new business fall short of expectations, terminal consumer demand, increased industry competition, etc.