Income growth resumed in '23 but fell short of expectations, and per capita output improved markedly. In 2023, the company achieved revenue of about 901 million yuan, an increase of 11.02% over the previous year. Among them, border security products and services achieved revenue of about 662 million yuan, up 9.46% year on year; cloud security products and services achieved revenue of about 62.29 million yuan, up 26.22% year on year; and other security products and services achieved revenue of about 166 million yuan, up 23.43% year on year. In 2023, net profit to mother was achieved - RMB 239.8 million, and losses increased by 31.42% compared with the same period last year; in 2023, the company achieved restorative revenue growth. After completing internal adjustments and restructuring after Shenzhou Digital's shareholding, daily operations have entered a normal state. The output per capita of sales increased by 55.96% compared to the same period last year, sales repayments increased by nearly 40% year on year, and the net outflow of cash flow from operating activities decreased by about 82.47% year on year, achieving significant improvements. However, the main reason for the increase in losses was the increase in additional expenses brought about by restructuring, the continued investment of three fees, and the decline in gross margin due to declining industry sentiment and competitive pressure.
23 years is a year of recovery, and 24 years is five years of reduction. In 2023, in addition to completing internal restructuring, the company announced “four tough battles”, namely “business opportunity management,” “chip strategy,” “Xinchuang campaign,” and “ecological upgrading.” Judging from the results, the recovery in revenue growth represents the beginning of results in business opportunity management; ASIC chips have entered the first streaming phase in March 2024, and the company expects to complete the first flow film in the second half of 2024 and enter the internal testing process of the chip; Xinchuang has released 16 new product lines with a total revenue of about 93.2311 million yuan, a year-on-year growth rate of about 88.19%; In terms of channel ecology, the 2023 channel reported nearly 10,000 effective business opportunities, and the sales contract amount contributed by the channel throughout the year was about 9,000. 10,000 yuan, a significant increase over the past. In 2024, while consolidating the “Four Tough Battles”, the company proposed the “Baike Plan”, which plans to train 100 high-potential customers to prioritize development, and use data security governance as an entry point to strengthen the expansion of the security field.
Overall, 2023 is the company's consolidation and recovery year, and in 2024, the company will focus on reducing losses and recovering profits. Currently, due to macroeconomic uncertainties and the fact that business often accounts for a small share in the first quarter and the first half of the year, the company's established operating goals will not be revealed until the second half of the year. At this stage, we are cautiously optimistic about the company's revenue performance and loss reduction level throughout the year.
Investment advice. We estimate that in 2024-2026, the company will achieve revenue of RMB 10.48 (-17.54%)/RMB 12.79 (-20.85%)/RMB 1,616 billion, and realized net profit of -125 million yuan (estimated loss reduction of about 50%), RMB 10.95 million and RMB 106 million, respectively. Since the company's revenue in 2023 fell short of expectations, in 2024, we continued to lower the company's revenue expectations for the next three years due to factors such as macroeconomic uncertainty and seasonal factors (performance in the second half of the year was often higher than in the first half) and the prosperity of the cybersecurity industry.
Referring to factors such as the company's strength and market expansion capabilities in the field of cybersecurity hardware architecture and security chips, and comparable company valuations (the average PS of domestic cybersecurity companies in 24 years was 3.4), we gave the company 3.5 times PS in 2024 (originally 5 times), then the target market value was RMB 3.67 billion, and the target price was RMB 20.36 per share (-26.0%), maintaining the “superior to the market” rating.
Risk warning. Factors such as the company's market development falling short of expectations; the company's security chip launch schedule falling short of expectations; loss reduction progress falling short of expectations; and sudden cybersecurity incidents affecting the company's brand.