Revenue for 2023 was largely in line with our expectations, and net profit to mother was lower than our expectations
The company announced its 2023 results: revenue of 1,829 billion yuan, +7.7% year on year; net profit to mother of 83.39 million yuan, down 42.1% year on year. Revenue was basically in line with our expectations, and net profit was lower than our expectations, mainly due to the decline in G-side gross profit exceeding expectations. In a single quarter, 4Q23 revenue was 633 million yuan, up 2.3% year over year. Net profit attributable to mother was a loss of 20.08 million yuan (4Q22 net profit of 52.36 million yuan).
Development trends
B-side customer base differentiated strategic management, good business development. B-side revenue was 1,085 billion yuan, up 13.84% year on year; B-side gross profit margin was 73.86%, up 0.9ppt year on year; B-side business net profit of 245 million yuan (total net profit, same in this segment), up 37.37% year on year; B-side net profit margin was 22.62%, up 3.87 percentage points from the same period last year. 1) The SME customer base focuses on high-value customers: the “100 Million Enterprise Finance and Taxation” platform achieved ARR (subscription revenue) of 530 million yuan, +8.0% year over year; ARPU of 910 yuan (YoY 8.0%); of these, 610,000 high-value users, an increase of 77.3% over the previous year. 2) The fiscal and tax agent customer base expands the customer base: the “100 Million Enterprise Account” SaaS platform ARR 520 million yuan, +24.0% year over year; the number of active users was 7.1 million, up 20.3% year on year; ARPU was 102 yuan, -7.6% year over year. 3) Innovative business customer groups PTS and GTS continue to expand customers and monetize the value of financial and tax big data commercial services.
We expect B-side revenue to continue to grow rapidly in 24, driven by revenue from the fiscal and tax agent customer base.
The decline in gross profit at the G end led to an increase in losses. G-end revenue was 738 million yuan, down 0.07% year on year; G-end gross profit margin was 28.9%, -11.3ppt, which we think was mainly affected by the tightening of user budgets; we estimate the net loss of the G side business was about 163 million yuan (an increase of about 127 million yuan over the loss in '22). The company said it will build intelligent service products with high gross profit tax and fees in '24, and we expect G-side gross margin to improve.
R&D expenses have increased more than expected, repayments have increased, and OCF is growing faster. In 2023, the company's sales, management, and R&D expenses were +1.36%/1.94%/12.42%, respectively. Among them, the increase in R&D expenses was mainly due to increased employee remuneration and amortization growth brought about by intangible asset R&D carry-over. In 2023, the company's net cash flow from operating activities was 244 million yuan, an increase of 172% over the previous year, mainly due to an increase in business receipts. At the end of '23, the company's accounts receivable were 170 million yuan, +15% year over year; inventory was 204 million yuan -17% year over year. We believe it stemmed from G-side business receipt; contract debt of 826 million yuan, +18% year over year.
Profit forecasting and valuation
Taking into account the slowdown in the company's G-side business revenue growth rate and the increase in R&D expenses, we lowered 2024/25 net profit by 11.8%/19.9% to RMB 260 /390 million yuan. The current stock price corresponds to the 2024/2025 price-earnings ratio of 36.3x/24.2 times. To maintain the outperforming industry rating, referring to the 2025 price-earnings ratio estimate, we should lower the target price by 19.0% to 34.00 yuan, corresponding to 35.5 times the 2025 price-earnings ratio, which has 46.9% upside compared to the current stock price.
risks
G-side business losses expanded; B-side market development fell short of expectations; tax informatization budgets fell short of expectations.