The company disclosed its 23-year results announcement. Revenue of 17.117 billion yuan (YoY -14.4%) was achieved in 2012, mainly due to a decline in the group's revenue due to shrinking business demand from core customers; net profit to mother was 713 million yuan (YoY -6.1%). Gross margin was +0.4 pct YoY to 23.4%. Sales expenses were -8.5% to 888 million yuan, and management expenses were -19.5% year-on-year to 1,354 million yuan.
Cornerstone business: Continue to broaden the customer range and maintain competitiveness in the context of the phased contraction of leading customer businesses. With revenue of 10.667 billion yuan (YoY -20.3%) in 2023, we are deeply involved in customers in the Huawei, Internet and high-tech industries and maintain leadership; the financial business is progressing steadily; the telecommunications business is deepening cooperation with existing customers; the energy sector is deepening cooperation with central and state-owned enterprises; the automotive sector is actively promoting new breakthroughs in manufacturers such as ideals, and continuing to expand overseas business.
Cloud intelligent business: create a “1+3” business formation to achieve a second growth curve. Revenue in 2023 was -2.5% YoY to $6.45 billion, and the share of revenue rose to 37.7%. The company has become a comprehensive partner of HUAWEI CLOUD in all fields. On the AI side, the industry version of the AIGC application and model factory service was launched to open up the “last mile” of large-scale model application implementation. In terms of AIoT and digital twins, Hongmeng launched Kaihong's innovative intelligent connectivity products, focusing on the north-south ecological development path and providing comprehensive solutions. In terms of pan-ERP, the implementation of pan-ERP is driven by consulting, and close cooperative relationships have been established with leading central state-owned enterprises such as CNPC.
Profit forecasting and investment advice. The company is gaining momentum in business capabilities such as AI, cloud, Hongmeng, and pan-ERP, to broaden the scope of customers and reduce costs and increase efficiency. It is expected that revenue will grow steadily from 24 to 25, gross margin will rise steadily compared to 23, expense ratios will tend to decline, and profits will improve. The estimated net profit for 24-25 will be 793/871 million yuan. The company penetrates deep into the industry and strengthens AI digital transformation capabilities, and has growth prospects. Referring to comparable company valuations, a PE valuation of 20 times over 24 years was given, and a reasonable value of HK$5.91 per share was obtained. Maintain a “buy” rating.
Risk warning. Increased labor costs; growth of major customers falls short of expectations, etc.