Incident: Youyou Network publishes the 2023 Annual Report. In 2023, the company achieved annual revenue of 9.796 billion yuan, an increase of 5.8% over the previous year; net profit attributable to shareholders of listed companies was -967 million yuan, compared with profit of 219 million yuan in the same period last year.
Taking on the demands of digital intelligence and localization, the company achieved good growth in both customer quality and quantity: The company achieved steady revenue growth in 2023. Although the business revenue of government and other public organization customers decreased by 12.5% year on year, benefiting from the strategic opportunities of enterprise digital intelligence, localization, and globalization, the company achieved good growth in the number and quality of enterprise customers of all sizes. Among them, with the help of the company's organizational structure adjustments, the company added 10 new first-tier central enterprises, and the number of project contracts and contract amounts above the 10 million level achieved rapid growth; YonSuite for medium-sized enterprises achieved a rapid increase of more than 100% year-on-year in the number of customers and operating income, with a contract contract amount of about 280 million yuan, an increase of nearly 90% over the previous year; Changjietong for small and micro enterprises turned losses into profits. The number of new paid enterprise users was about 130,000 in the 2023 cloud service business, and the cumulative number of paying enterprise users reached 633,000.
Increased R&D and ecological construction are dragging down short-term performance, and long-term returns are worth looking forward to: the company experienced a large loss in net profit in 2023, mainly a significant increase in operating costs and expenses. Among them, the company's gross margin fell to 50.73% in 2023, compared to 56.37% in the same period last year, mainly due to the company's year-on-year increase in outsourcing costs and 21.2% year-on-year increase in technical service and training costs in order to cultivate a professional service ecosystem; sales expenses increased 22.7% year-on-year, mainly due to the upgrading of the company's industrialized organizational model. Employee remuneration, travel expenses, and business promotion expenses increased by about 18%, 48%, and 115%, respectively; R&D expenses increased 20.1% year-on-year, mainly due to the company's increased R&D expenditure in recent years, not only in 2023 Intangible assets increased by 1,034 million yuan to 3,872 billion yuan year over year, and depreciation and amortization of R&D expenses increased by about 113 percent to 518 million yuan year over year. In terms of use of expenditure, the increase in outsourcing costs and sales expenses is mainly used for ecosystem and channel construction, which helps the company seize market share during the period of strategic opportunities. Increased investment in R&D also helps enhance product competitiveness. The long-term returns brought about by the company's high investment are worth looking forward to.
Investment advice: The company's subsequent input and output are worth looking forward to. The company's revenue for 2024-2026 is estimated to be 112.11, 132.34, and 15.886 billion yuan, respectively, with net profit attributable to mother of 1.95, 4.47, and 774 million yuan, respectively, and EPS of 0.06, 0.13, and 0.23 yuan respectively. Maintain an “Overweight” rating.
Risk warning: Cost control falls short of expectations, customer contracts fall short of expectations, and increased market competition.