The profit side increased dramatically. The company released its 2023 annual report. In 2023, the company achieved operating income of 3.801 billion yuan, a year-on-year decrease of 11.94%; achieved net profit of 755 million yuan, an increase of 1588.44% over the previous year; net profit without deduction of 700 million yuan, an increase of 279.84% over the previous year. In terms of gross margin, the company's comprehensive gross margin was 38.80%, an increase of 13.53pct over the previous year. Looking at Q4 alone, the company achieved revenue of 907 million yuan, a year-on-year decrease of 11.62%; net profit to mother was 203 million yuan, up 177.54% year on year; after deducting non-net profit of 182 million yuan, an increase of 360.50% year on year. The company's net operating cash flow in 2023 was 1,133 billion yuan, up 347.56% year on year; contract debt was 96 million yuan, up 41.58% year on year.
In terms of the three rates, the sales expense ratio was 7.54%, the management expense ratio was 6.39%, and the R&D expense ratio was 7.27%, with year-on-year changes of +0.93pct, +0.96pct, and +0.96pct, respectively.
Profits in the billing business increased significantly, and overseas hardware continued to grow. In terms of segmented business, receipt, value-added services, and electronic payment products are the company's top two businesses. 1) Receipt and value-added services: Achieved operating income of approximately RMB 2,583 million, a year-on-year decrease of 15.55%, accounting for 67.96% of total revenue. The cumulative transaction flow of Jialian Pay in 2023 was about 1.94 trillion yuan, a year-on-year decrease of 24.81%. It was mainly affected by license renewal factors and strengthened risk control compliance, and achieved net profit of RMB 383 million, an increase of 1163.37% over the previous year, mainly due to capital refund factors in the same period in '22 and the impact of the increase in gross margin of the billing business in '23. If the impact of capital refund factors is excluded, Jialian Pay 2023 Annual net profit grew at a year-on-year rate of about 111.32%; 2) Electronic payment products: achieved revenue of 993 million yuan, up 1.20% year on year, accounting for 26.14% of total revenue. In 2023, the company's overseas market revenue for electronic payment devices continued to grow. The gross profit of the overseas market of electronic payment devices increased 18.70% year on year, and overseas markets achieved shipments of 4.4639 million units, an increase of 48.63% year on year.
The focus is on bill collection and payment services, and domestic and overseas efforts are being made simultaneously. Domestically, in July 2023, Jialian Payment's “Payment Business License” was successfully renewed, eliminating key risks affecting the company's billing business operations. In the fourth quarter of 2023, Jialian Payment's billing product line shipped in large quantities, and monthly transaction volume increased sequentially in December. As of December 31, 2023, Jialian Pay has reached cooperation with 400 banks, covering state-owned banks, joint stock commercial banks, urban commercial banks, agricultural credit cooperatives, etc.; the number of Jialian Payment branches reached 36, and the direct management channels covered 178 cities across the country, and initially built a direct management network covering the whole country. In the overseas market, as of December 31, 2023, the basic team of the company's cross-border business group has been formed, the initial construction of a payment service product system for the cross-border and overseas markets has been completed, and the first overseas local transaction receipt has been achieved. Paykka, a newly launched cross-border payment product, already supports the receipt business of 10+ mainstream global currencies and the receipt business of 150+ global currencies.
Improve the AI business layout and create new development space. The company continues to increase resource investment in the field of artificial intelligence and continuously improve its business layout. In 2023, the company and Shanghai Weisha Network Technology Co., Ltd. jointly funded the establishment of Shanghai Shiyi District Information Technology Co., Ltd. to set up an artificial intelligence research team to carry out research and development of GeneralPurpose AI Agent (GeneralPurpose AI Agent) technology and develop multi-modal AI products, which will bring new business growth opportunities to the company. On March 22, 2024, Shanghai Shuyi District Information Technology Co., Ltd. officially released the first AI “digital employee” (AI Agent) product. This product is a General Purpose AIAgent (General Purpose AIAgent) product. Based on the GPT model of enterprise privatization deployment, it innovatively uses the CUI (Conversational User Interface) interaction method to provide artificial intelligence “digital employee” services in different enterprise and merchant scenarios.
Profit forecasting and investment advice. In terms of receipt business, the completion of domestic payment license renewal has led to rapid business expansion. Overseas payments have already been collected for the first overseas local transaction, and the domestic and overseas billing business has gone hand in hand. With the introduction of “digital workers,” the AI business also brought new growth breakthroughs to the company. We expect the company's 2024-2026 net profit to be 9.64/12.46/1,582 million yuan, up 27.72%/29.22%/26.98% year over year, and EPS of 1.73/2.24/2.84 yuan respectively, giving the company 20-25 times the 2024 dynamic PE, with a reasonable value range of 34.60-43.25 yuan, maintaining the “superior to the market” rating.
Risk warning. The profitability of the billing business declined, the rapid growth of overseas POS machines was unsustainable, and the development of artificial intelligence applications fell short of expectations.