In 2023, the company's Xinchuang integrated business grew rapidly, the gross margin of the core business increased, management efficiency and cash flow conditions continued to improve, and overseas business was steadily promoted. AI was forward-looking and vigorous, and maintained a “highly recommended” rating.
Incident: The company released its 2023 annual report, achieving revenue of 5.204 billion yuan, YoY +21.45%; net profit to mother of 326 million yuan, YoY +28.76%; net profit after deducting non-return to mother of 316 million yuan, YoY + 29.34%; 23Q4 revenue/net profit to mother/ net profit YoY +30.61%/18.36%/16.37%.
The growth rate of Xinchuang integration is impressive, and the gross margins of both core businesses have increased. By business line: 2023 software development business revenue of 3.322 billion yuan, YoY +5.54%; Xinchuang integrated business revenue of 1.72 billion yuan, YoY +77.47%; innovation operating revenue of 157 million yuan, YoY -4.53%. The increase in integrated business is mainly benefiting from the promotion of credit innovation by medium and large banks. Last year, more than half of the new orders added to the company's data business line were related to Xinchuang. Cooperation in the Xinchuang ecosystem deepened, and there were important orders with domestic database vendors such as Huawei. In terms of gross margin, Xinchuang's integrated gross profit margin was 10.48%, up 1.41 pct year on year; the gross profit margin for software development was 31.13%, up 1.71 pct year on year. It mainly benefited from the increase in the degree of product standardization, the improvement of customized implementation processes, and the company's active use of new technologies such as generative AI to improve basic development efficiency and quality.
Management efficiency continues to improve, and cash flow conditions have improved dramatically. The sales/management/R&D expense ratio in 2023 was 3.10%/5.81%/10.92%, with a year-on-year change of -0.18/+0.21/-0.75pct. Among them, the increase in the management fee rate was mainly due to share payment expenses. Stock payments generated 45.81 million yuan last year, reversing 25.69 million yuan. The non-profit after excluding share payment expenses was 362 million yuan, YoY +65.49%; the increase in R&D expenses was mainly affected by the increase in R&D personnel. At the end of 2023, the company had 1,883 R&D personnel. YoY +18.95% In terms of cash flow, cash received from sales of goods and provision of services was 5.449 billion yuan, YoY +25.96%; net operating cash flow was 447 million yuan, YoY +155.08%.
Overseas business is progressing steadily, and AI is forward-looking and vigorous. In 2023, the company completed online acceptance of existing projects, and signed phase II and phase III orders. It is actively promoting the signing of new projects in markets such as Singapore, Cambodia, Indonesia, and Hong Kong. At the same time, it plans to invest 10 million US dollars in overseas investment funds focusing on Southeast Asian fintech and digital markets to participate deeply in the digitization process of the overseas financial industry. In terms of AI, it pioneered the launch of the first batch of large-scale model application products and solutions for the financial industry through independent research and development, including 4 application-level products and 1 development platform. As one of the leading IT vendors in banks, the company has rich experience in implementing AI+ scenarios, and the AI business can be expected to develop in the future.
Maintain a “Highly Recommended” investment rating. The company is expected to have 24-26 revenue of 56.4/63.1/6.96 billion yuan, net profit of 365/4.26/501 million yuan, YoY +12%/17%/18%. The current stock price corresponds to PE26/22/19x, maintaining a “highly recommended” investment rating.
Risk warning: Overseas market policy risks; declining IT spending in the banking sector; increased market competition.