The company's 2023 results are in line with market expectations

The company announced its 2023 results: operating income of 2,516 billion yuan, +59.54% year over year; net profit to mother of 343 million yuan, +41.10% year over year; net profit of 230 million yuan, +37.00% year over year. Looking at a single quarter, 4Q23 achieved revenue of 1,116 billion yuan, +48.98% year over month, and +64.86% month on month; net profit to mother was 239 million yuan, +39.57% year over year, and +253.12% month on month. The results are in line with market expectations.

Development trends

Multi-line parallel drives rapid growth in performance, and the “horse racing mechanism” has achieved remarkable results. The company's performance continued to grow rapidly in 2023. By sector, 1) the special sector achieved revenue of 836 million yuan, +15.69% over the same period, and the traditional dominant business maintained steady growth; 2) revenue in the smart government, meteorological ecology, and enterprise energy sectors grew rapidly, +106.87%/101.58%/111.74%, respectively, mainly due to accelerated business exploration by various subsidiaries and achieving continuous breakthroughs; 3) The online business achieved revenue of 0.2 billion yuan, and the second growth curve entered the harvesting stage ahead of schedule. The company is steadily promoting a group and ecological development strategy, supporting the rapid development of subsidiaries through a “horse racing mechanism”, and achieving relatively rapid growth in parallel performance across multiple lines.

Increase research and development to enrich product layouts, and establish a new growth curve for online business. 1) The company's R&D expenses in 2023 were +67.05% to 373 million yuan. The company increased investment in scientific and technological innovation, applied for 438 new intellectual property rights throughout the year, and launched various applications based on GEOVIS to further enrich the product layout. 2) In 2023, the company's online business received 20,914 certified individual developers and 21,192 certified enterprise developers. Developers built 13,769 active ecological applications, reaching a total of 45.55 million end users, and achieved revenue of 20.8 million yuan. Online business development saw initial results, laying the foundation for the development of the digital planet ecosystem. 3) The company's net cash inflow from operating activities in 2023 was 125 million yuan, a significant improvement over the previous year.

Deepen the group development strategy and lay out emerging fields such as AI and low altitude to help grow. 1) The company will establish Star Map Capital and Hesheng Star Fund in 2023 to consolidate the underlying capabilities of the industry and expand the application landscape through foreign investment. The “horse racing mechanism” enabled the net profit of Star Map Space/Star Map Smart/Star Map Measurement and Control/Star Map Weitianxin was +48%/50%/22%/91%, respectively, and the subsidiary grew rapidly. We believe that the company's group strategy continues to be deepened, which is expected to further strengthen the advantages of clustering in the field of aerospace information applications. 2) The company is speeding up the layout of AI and low-altitude fields, building its own supercomputers, expanding the application of aerospace information through the “Sky Spirit” basic model, and developing products such as GEOVIS intelligent low-altitude navigation management. We believe that the layout of emerging fields is expected to inject long-term development momentum into the company.

Profit forecasting and valuation

Considering that the group strategy may drive the expansion of revenue scale and the increase in cost side costs, we raised the company's 2024e revenue by 30% to $3,753 billion, kept the company's 2024e net profit unchanged, and introduced 2025e net profit of 632 million yuan. The company's current stock price corresponds to 2024/2025 40.2/30.2x P/E. We maintain an outperforming industry rating, are optimistic about the company's development prospects under the group strategy, and raised the target price by 17% to 64.90 yuan, corresponding to 49.9/37.4x P/E in 2024/2025, with a potential increase of 24%.

risks

Market expansion falls short of expectations; macroeconomic policies and environmental risks.