Key points of investment

The company released its annual report for 2023, with net income of $1,819 million (YoY -25.98%), net profit to mother of $374 million (profit to loss), net profit of $454 million (profit to loss); single Q4 revenue of $232 million (YoY -78.18%), net profit attributable to mother of $334 million (profit to loss), net profit of non-attributable net profit of $350 million (profit to loss).

Delays in downstream bidding and acceptance have put pressure on revenue. Looking at the gradual restoration of sub-businesses in '24, the annual revenue of spatial infrastructure planning and construction was 155 million (-18.92%), PIE+ industry revenue of 1,588 million yuan (-27.44% YoY), and cloud service revenue of 77 million (-1.03% YoY). The main reason is that customers are concentrated in the government, large state-owned enterprises and special fields, and the impact of the suspension of the company's bidding qualifications on the military procurement network. The bidding process for some projects was delayed. Decline; at the same time, due to delays in acceptance of some projects, the company's revenue declined year-on-year; considering the budgets and needs of downstream customers, we expect that orders in special fields will resume in the future, and orders from government and enterprise customers will gradually resume as trillion treasury bond orders are implemented.

Delayed acceptance and superposition of integrated projects lowered the gross profit margin. As orders improved, the gross margin was expected to stabilize throughout '23, the company's gross margin was 35.92% (down 12.13pct year on year), hardware costs of 279 million yuan in operating costs (+132.53% year over year), year-end inventory of 1,608 million yuan (+91.56% year over year); single Q4 gross profit margin -23.65% (year-on-year change from positive to negative); we judge 1) The company undertook some integrated business involving more hardware, etc. Causing the company Gross margin is under pressure. It is expected that as orders improve in the future, the acceptance process is expected to return to normal, and the company is also expected to moderately control the share of integrated orders. At the same time, the share of data sales revenue is expected to increase, and overall gross margin is expected to stabilize.

Expenses are expected to be controlled, and repayments are expected to gradually improve

(1) 23. Throughout the year, the company's sales/management/R&D expenses rate was 14.49%/15.26%/21.03% (up 4.84/ 4.45/ 9.00pct year-on-year). The company invested more in R&D and continued to develop a next-generation geoscience computing platform. It is expected to be released in mid-2024. It is expected to drastically lower the threshold for remote sensing data analysis and further expand the user base. In the future, the company is expected to improve quality and efficiency and control costs;

(2) Affected by the macroeconomic environment in '23, some customer repayments fell short of expectations, and accrued credit impairment losses increased compared to the previous period. We expect that with the gradual restoration of downstream customer budgets, the company's repayments are expected to improve;? Self-developed satellites+drones form a data sensing system, which is expected to benefit from low-altitude economic policies and demand. The company has a self-developed drone production base, combined with the first “Female” satellite constellation to form a data source acquisition system layout where high-altitude and low-altitude remote sensing coexist and complement autonomous satellite and autonomous drone data; the company has independently developed a drone supervision platform based on cloud computing and big data technology, which can achieve real-time monitoring and management of drones. Relevant technical achievements have already been made in the drone command and control platform of the China Geological Survey Natural Resources Comprehensive Survey and Command Center, Hebi, Fuzhou, Suzhou, Yulin, etc. The project has achieved mature application transformation; in the future, the company will build a scientific urban low-altitude airspace planning and design system through the construction of solutions such as low-altitude airspace management infrastructure, low-altitude intelligent networking infrastructure, and urban map modeling. A certain order has already been formed in this field, and we expect the company to benefit from the release of low-altitude economic policies and demand.

Profit forecasting and valuation

We expect the company's 24-26 revenue to reach 28.15/37.29/4.841 billion (+54.79% /32.45%/ 29.84%), and net profit to mother is expected to reach 2.40/334/404 million (year-on-year change from negative to positive/ 39.23%/31.71%), corresponding to the current PE of 24.18/17.37/13.19, maintaining a “buy” rating.

Risk warning

Risk of important markets/customers/orders falling short of expectations, risk of PIE+ industry business falling short of expectations, risk of cloud and data service business falling short of expectations, risk of market competition, etc.