Event: The company announced its 2023 full year results. In 2023, the company achieved revenue of 3,078 billion yuan, 40.65% year-on-year, net profit to mother of 663 million yuan, +34.91% year-on-year, and net profit of 359 million yuan after deducting non-attributable net profit of 359 million yuan, or -38.95% year-on-year. In 2023Q4, the company achieved revenue of 790 million yuan, or -36.88% year on year, net profit attributable to mother of 29 million yuan, which turned loss year on year. Net profit not attributable to mother was 245 million yuan, which turned into a year-on-year loss.

Digital culture sector: The wingman network maintains steady progress and optimizes and upgrades the business structure. In 2023, the company's gaming business achieved revenue of 1,317 billion yuan, YoY -23.63%. The overall business of Wingman Network has maintained a steady and progressive trend. The degree of game refinement has increased markedly, and the market share of Winger Whipped Egg is in the top tier. At the same time, the winger is actively exploring the optimization and upgrading of the business structure, incubating and cultivating new forms of online literature, and starting to lay out a new digital marketing circuit, which is expected to bring in new volume.

Digital technology sector: IDC's business is expanding steadily, and a major communication model has passed the filing. In 2023, the company's technology information services achieved revenue of 641 million yuan, YoY +6.12%. Fuchun Cloud Technology's data center business has maintained steady growth, and the existing contracted cabinets have maintained a high charging rate, and is steadily expanding the existing cabinet market. As of 2023, Communication Brain has provided technical services to 88 media in cities and counties in Zhejiang Province. In addition, Communication Brain's first vertical model of the media industry, Communication Big Model, has passed the generative artificial intelligence filing, making it the first large-scale media vertical model developed by a domestic media technology company to pass the registration.

Data operation sector: Zhejiang Big Data Trading Center initially built a “1+N” integrated data circulation service platform across the province. The Big Data Trading Center has built 4 industry-specific zones, including the “International Data Exchange Zone” and “Industrial Data Circulation and Trading Zone”, as well as 7 regional zones including Ningbo, Wenzhou, and Shaoxing. Lead the completion of multiple digital asset registration integration services, and continue to explore new business models around capitalization and development and utilization of data elements.

Q4 The expense rate remained stable due to impairment. The company's Q4 net profit was -0.29 million yuan, and the year-on-year loss was mainly affected by the external environment. The company's fair value changed by -42 million yuan, and asset impairment losses amounted to 189 million yuan. After excluding this impact, the company's performance was in line with expectations. The overall gross profit margin in 2023 was 68.27%, +6.87pct year on year, and the net profit margin to mother was 21.54%, +12.06pct year on year. The cost rate for the 2023 period was 42.91%, -1.41pct year on year, with sales/management/R&D/finance expenses ratios of 13.77%/15.15%/14.40%/-0.41%, respectively.

Investment advice: In 2024-2026, we expect the company to achieve revenue of 31.62/34.64 billion yuan, +9.56%/+12.26% YoY, net profit of 7.04/8.34/ 995 million yuan, +6.15%/+18.46%/+19.33%, corresponding to PE 19.80X/16.72X/14.01 X, maintaining a “buy” rating.

Risk warning: Data center construction falls short of expectations, stricter policy regulations, and increased market competition.