Incidents:
Shanghai Steel Union released its 2023 annual report. In 2023, the company achieved revenue of 86.314 billion yuan, up 12.73% year on year; net profit to mother was 240 million yuan, up 18.30% year on year; net profit after deducting non-return to mother was 191 million yuan, up 12.57% year on year; and gross margin was 1.47%, down 0.15 pct year on year. Looking at a single quarter, the company achieved revenue of 19.767 billion yuan in the fourth quarter, up 12.61% year on year; net profit to mother was 73 billion yuan, up 12.52% year on year; net profit after deducting non-return to mother was 0.7 billion yuan, up 31.01% year on year; and gross margin was 1.74%, down 0.16 pct year on year.
Industrial data services and steel trading services are developing steadily
In 2023, the company's industrial data service sector achieved revenue of 802 million yuan, a year-on-year increase of 15.99%, and a three-year CAGR of 18.90%; of these, data subscription revenue was 439 million yuan, a year-on-year increase of 4.79%, and a three-year CAGR of 17.72%; 315,700 paid users, and a three-year CAGR of 21.5%. In terms of steel trading, the settlement volume of the steel and silver platform in 2023 was 63.6407 million tons, up 20.14% year on year. Steel and silver e-commerce achieved revenue of 85.508 billion yuan, up 12.70% year on year; net profit to mother was 320 million yuan, up 17.28% year on year.
Acquisition of minority shareholders' shares in Longzhong Information
On April 9, 2024, the company announced its intention to use its own capital of 172 million yuan to purchase 37.21% of the total shares held by minority shareholders of Longzhong Information, a holding subsidiary of the company. Longzhong News achieved revenue of 156 million yuan in 2023, an increase of 38.02% over the previous year; net profit was -10.2448 million yuan, and losses narrowed by 54.15%.
The company's acquisition increases investment in the energy sector, which is in line with the development strategy of rapid expansion of industrial data services. It is conducive to consolidating and enhancing comprehensive competitiveness and ensuring that the company can continue to grow bigger and stronger in the future.
Policies support the development of the data element industry
On January 4, 2024, the National Data Administration and others released the “Data Elements ×” Three-Year Action Plan (2024-2026), which plans to create more than 300 typical application scenarios by the end of 2026, with an average annual growth rate of over 20% in the data industry. On April 1, the 2024 National Data Work Conference was held in Beijing to propose measures such as improving the basic data system, improving the level of development and utilization of data resources, and empowering high-quality development through digitalization. The company is expected to benefit from the development opportunities of the data element industry.
Profit Forecasts, Valuations, and Ratings
Considering the pressure on the gross margin of industry data services, we expect the company's revenue for 2024-2026 to be 958.36/1055.08/116.221 billion yuan respectively, with year-on-year growth rates of 11.03%/10.09%/10.15% respectively, net profit to mother of 2.89/379/477 million yuan, 20.35%/31.05%/25.87%, EPS 0.90/1.18/1.48 yuan/share, respectively, and a 3-year CAGR of 25.68%. Since the company is one of the world's leading commodity and related industry data service providers, it is expected to benefit from the development of the data element industry. Referring to comparable company valuations, we gave the company 34 times PE in 2024, with a target price of 30.56 yuan, maintaining a “buy” rating.
Risk warning: Policy implementation falls short of expectations, products and technology falling short of expectations, risk of increasingly intense market competition, risk of fluctuations in the steel industry, credit management risks in e-commerce platforms, etc.