Introduction to this report:
The company's annual report performance continues to be under pressure. The short-term recovery momentum on the revenue side is weak, and profit margins are under pressure in the short term, but there is room for repair in the long term.
Key points of investment
The target price was lowered to 30.19 yuan to maintain the “gain” rating. Based on our predictions of government IT spending and predictions on the company's personnel planning, the profit forecast for 2024 and 2025 was lowered, and the profit forecast for 2026 was added. EPS is expected to be 0.48 (-0.36), 0.59 (-0.61), and 0.64 yuan respectively in 2024-2026. Considering the distortion of the company's net interest rate, the target price was lowered to 30.19 yuan by referring to 4.51 times the PS of the comparable company in 2024, maintaining the “gain” rating.
The annual report results are under pressure and are in line with expectations. The company released its 2023 annual report and achieved annual revenue of 2,441 billion yuan, a year-on-year decrease of 13.6%, and net profit to mother of 195 million yuan, a year-on-year decrease of 66.01%. The annual report results continue to be under pressure. There is no difference from the rapid report data, which is in line with expectations.
The short-term recovery momentum on the income side is weak. Judging from the revenue structure, the business volume of the company's various business lines has shrunk. Overall revenue in the smart recruitment sector fell 16.38%, with project revenue falling 9% and platform operating revenue falling 27%. We judge that until there is no major inflection point in fiscal policy, there is no basis for a sharp recovery in the number of government tenders. Revenue from the smart government sector fell 14.5%, and revenue from the digital construction sector fell by 2.63%. The prosperity of the three major business lines is linked to government IT spending. The momentum for short-term recovery is weak, and there is room for repair for a long time.
Profit margins depend on the growth rate of personnel, and short-term pressure is still high. The company's net profit margin once reached close to 20%. Currently, the pressure on profit margins is mainly due to falling gross margins and rising expense ratios. In terms of gross margin, we think it will be difficult to fix in the short term; the cost ratio depends on the company's staffing situation. Compared to other peer companies with sufficient cash on the books, it is expected that the company will make reserves for future industry recovery and will not adopt aggressive personnel adjustment strategies to release profit margins.
Risk warning: Fiscal investment has declined more than expected, labor costs have risen, policy risks