Easypoint Cloud 2023A performance overview: The company's total revenue was 1,271 billion yuan, -7.4% year on year; adjusted net profit was 15 million yuan, -88.7% year over year. In line with the above expectations, mainly due to the concentrated outbreak of the epidemic in early 2023, poor macroeconomic conditions, pressure on small and medium-sized enterprises, and a decrease in the number of service equipment in the company.
Main business 2023A revenue side: Pay-as-you-go IT integrated solutions business revenue was 1,116 billion yuan, -4.2% year over year, mainly due to poor overall economic conditions, small and medium-sized enterprises were under pressure to choose older equipment; equipment sales revenue was 139 million yuan, -28.4% year over year, mainly due to a decrease in equipment sales volume; SaaS and other service business revenue was 17 million yuan, +25% year over year, mainly due to increased system development revenue and other service revenue.
2023A profit side: The company's gross profit of 552 million ($627 million in 2022), gross profit margin of 43.5% (45.7% in 2022); mainly due to consumption recovery falling short of expectations, poor overall macroeconomic conditions, and pressure on small and medium-sized enterprises, which tend to choose to subscribe to older devices. At the same time, the company adjusted its sales strategy according to PC market conditions, which led to a slight decrease in the company's loss rate.
2023A operating data overview: The number of the company's 2023A service equipment has rebounded month by month, reaching 1.05 million units, +8% over the same period; the cumulative net increase of the number of units in 2023A is about 89,000 units, which is a significant increase compared to 22-0.6 million units. By the end of 2023, the company had 46,789 active customers, +8% year over year, while maintaining a high customer retention rate of 74% (73% in 2022). The number of remanufacturing equipment in the company was 840,000, +13.6% over the same period last year.
AI business: On February 22, 2024, the market expansion of the Microsoft Azure OpenAI product matrix and solutions authorized by the company formed a comprehensive strategic cooperation with Cigna Era. Based on Microsoft Azure OpenAI GPT product services, combined with deep insight into the customer needs of small and medium-sized enterprises, the company can create GPT+ product services that are more suitable for small and medium-sized enterprises, so that enterprises can use GPT products and services in compliance and safety, reduce the difficulty and cost of use, make them safer, more convenient, and more efficient, and further achieve the reach, application and popularization of AI in small and medium-sized enterprises, and help enterprises establish their own AI capabilities. In the future, the company will continue to be deeply involved in the field of AI, relying on the corporate office IT subscription, which is deeply connected to about 50,000 companies and more potential SME customers in the future, to help SMEs establish their own AI capabilities and better serve the broad enterprise service market.
We believe that due to the impact of the epidemic in early '23, the company was still able to obtain a positive increase in the number of customers and service equipment, indicating that the company has gradually escaped the adverse effects left over from the epidemic and the economic slowdown. In the future, along with the contrarian growth of various operating indicators in 23, and the AI business will gradually sign more customers. As a new growth point for the company, the 24Q1 business may continue to be released, and various performance indicators are expected to grow rapidly.
Investment advice: Based on the broad prospects of China's office IT usage payment market, the advantages of comprehensive office IT solutions are obvious. Easypoint Cloud is a leading enterprise in the industry, and its technical and scale advantages are constantly increasing.
As subscription fees for mainstream devices are further reduced, the number of the company's active customers and the scale of service devices are expected to continue to grow rapidly. Referring to the data disclosed in 2023, we adjusted the forecast for the company's revenue structure. The total revenue of FY2024-FY2025 was adjusted from 1,456/1,677 million yuan to FY2026 revenue of 1,453/16.75/1.946 billion yuan, and the adjusted net profit of FY2024-FY2025 was adjusted from 88/102 million yuan to 138/1.56/169 million yuan for FY2024-FY2026. We gave the company 3x P/S in 2024, corresponding to a market capitalization of RMB 4.359 billion and a target price of HK$8, maintaining a “buy” rating.
Risk warning: 1. Increased competition in the domestic cloud market; 2. Internet regulatory risks; 3. Recurrent risk of the epidemic; 4. Macroeconomic slowdown; 5. Increased competition in equipment sales