occurrences
The company released the “2023 Annual Report” after closing on March 29, 2024.
Comment:
The system integration business grew rapidly, driving the company's overall performance to improve in 2023. In 2023, the company achieved operating income of 5.204 billion yuan, an increase of 21.45%; realized net profit of 326 million yuan, an increase of 28.76% over the previous year; and realized net profit withheld from non-return mother of 316 million yuan, an increase of 29.34% over the previous year. By product, the software development and service business achieved revenue of 3.322 billion yuan, up 5.54% year on year, gross margin of 31.13%; system integration sales and service business achieved revenue of 1,720 billion yuan, up 77.47% year on year, gross margin of 10.48%; and innovative operation business achieved revenue of 157 million yuan, down 4.53% year on year. With the continuous advancement of the “autonomous, controllable” and “localized” development strategy of the national IT application innovation industry, the bank IT solution market has been comprehensively restructured and upgraded around independent innovation, and the company's system integration business has achieved rapid growth.
Deepen Huawei's ecological cooperation and steadily advance overseas business
The company is an important partner of Huawei in the financial industry. In terms of Kunpeng's native ecosystem, the two sides will develop native applications for the financial industry based on the Kunpeng hardware base, openEuler, the development kit Kunpeng DevKit, and the application enablement kit KunpengBoostKit, and continue to release versions of Kunpeng's commercial software with better performance to create a model for cooperation in the development of Kunpeng's native applications. In terms of Hongmeng's native ecosystem, the company not only began with the launch of the Hongmeng System 1.0, but also pioneered the adaptation of channel products such as mobile banking and basic mobile development platforms to the HarmonyOS system, but also actively collaborated with many financial institutions to promote financial scenario solutions based on the HarmonyOS system. In terms of overseas business, existing projects have been tested online, and phase II and phase III orders have been signed; in terms of market expansion, the company has received good feedback in markets such as Singapore, Cambodia, Indonesia, and Hong Kong, and is actively promoting the signing of new projects; in terms of innovative business, the company's two operations in Indonesia have entered a stable operation period and generated revenue.
Continue to increase investment in R&D and explore the application of intelligent spectrum large models
The company's R&D investment focuses on core directions such as Xinchuang ecological products, large model applications, and data asset applications. In 2023, the company invested 568 million yuan in R&D, an increase of 13.63% over the previous year. The company formally signed a large model cooperation agreement with Beijing Zhipu Huazhang Technology Co., Ltd., a domestic model company. The two sides will focus on technological innovation, business collaboration, and platform and ecological co-construction to accelerate the implementation of big language model technology in more financial business scenarios. Currently, they have communicated with many financial institutions to explore the implementation of big models in specific businesses.
Profit forecasting and investment advice
Finance and technology are deeply integrated, and Xinchuang continues to advance in the financial industry. The banking industry is expected to continue to increase IT investment. With its position as an industry leader, the company is expected to fully benefit from the new boom cycle. The company's 2024-2026 operating income is estimated at $58.01, 63.48, and 6.818 billion yuan, net profit to mother of 3.70, 4.27, and 485 million yuan, EPS of 0.52, 0.60, 0.68 yuan/share, and the corresponding PE is 24.71, 21.38, and 18.83 times. Maintaining a “buy” rating considering the industry's room for growth and the continued growth of the company's business.
Risk warning
Market competition risk; risk of relative concentration of target industries and sales customers; risk of technology and product development quality; risk of infringement; risk of loss of core technical personnel; seasonal risk; regulatory risk; overseas market risk.