Performance Overview: In 2023, the company's revenue fell 33.43% to $534 million, net profit to mother fell 91.26% to 15.63 million yuan, and after deducting non-net profit, it also decreased by 83.90% to 22.6068 million yuan. Among them, 2023Q4 revenue also fell 50.73% to 88.7 million yuan, net loss to mother of 86.2 million yuan (yoy -754.97%), deducted non-net loss of 50.41 million yuan (yoy -932.24%), which was mainly affected by factors such as declining off-season revenue, increased additional costs such as year-end bonus+site change compensation, and loss of 50 million yuan due to late payment of China Finance Trust products.

The macro-employment environment is still affecting enrollment, waiting for an inflection point in demand. The company's training course cycle is about six months, so current receipts and contract liabilities are highly correlated with the performance of the next six months. The impact on the macro-employment environment still exists, affecting students' registration sentiment+ability to pay. At the same time, considering the higher base in 2022, the number of students enrolled in 2023 showed a year-on-year downward trend. 2023Q1/Q2/Q3/Q4 single quarter receipts (cash received from sales of goods and provision of services) were 185 million yuan (yoy -19.75%)/105 million yuan (yoy -49.46%) /9674.44 billion yuan (yoy -49.46%) /9674.44 10,000 yuan (yoy -62.85%)/604.227 million yuan (yoy -52.94%), contract liabilities of 75 million yuan (yoy -57.38%) as of the end of 2023 reflect a continued downward trend on the revenue side until 2023. At the same time, 2024H1 revenue is still under year-on-year downward pressure. Looking ahead to the medium to long term, it is expected that the student employment rate has now followed macroeconomic recovery. Since the beginning of 2024, the company's enrollment side has shown a month-on-month upward trend, which is expected to drive revenue back to a normal growth trajectory.

The gross margin level declined slightly due to the rigidity of costs and expenses, but it remained relatively high in history, and the net interest rate level was under pressure. Learning center rents and labor costs for faculty and staff were relatively rigid. As a result, the company's gross margin declined somewhat in 2023. However, benefiting from the company's cost reduction and efficiency strategy starting in 2022, gross margin was still at a relatively high level in history. The gross margin in 2023 was 50.45%, YOY-7.25pcts, and the sales/management/R&D expenses rates were 17.12%/13.79%/11.87%, respectively, +1.63/+3.5/3.54 pcts, net profit margin was -19.36 pcts to 2.92% year on year.

The construction of academic education is progressing steadily, and higher education and secondary vocational education are integrated vertically. In January 2024, the company announced that it plans to increase the capital of its wholly-owned subsidiary Datong Haoxue with its own capital of RMB 260 million to ensure the steady progress of its full-time integrated recruitment college Datong Internet Vocational and Technical College (now to be renamed Datong Data Technology Vocational College) project. The college plans to cover an area of about 300 acres. The first and second phases have a total construction area of 256,000 square meters. The first phase of the project is expected to be completed by the end of July 2024. It is expected that in 2024, enrollment work will be officially carried out for ordinary high school graduates, fresh secondary school students, and students with equivalent degrees. In the future, it is expected that higher education and secondary vocational education will be integrated vertically, and that the vocational training business sector will work together to achieve a comprehensive layout of digital talent training.

Hongmeng cooperation has deepened, the quality of teaching continues to improve, and students' employment performance is outstanding. Teaching and research capabilities have always been one of the core barriers to leading the smart transmission industry. During the reporting period, the company upgraded courses in traditional JAVA disciplines and e-commerce visual design subjects, while also focusing on improving the quality of teachers' teaching, and laying a solid foundation for future sustainable teaching and research growth. In addition, the company continues to deepen cooperation with enterprises such as Hongmeng and Alibaba Cloud. In January 2024, the company signed a HarmonyOS ecosystem cooperation agreement with Huawei (including technical training/business consulting/talent transfer); on February 28, the first “pure blood” native Hongmeng development course based on Huawei's latest HarmonyOS NEXT version began, and a separate new course system was set up to further improve the quality of previous Hongmeng course versions; in March, the company became a certified training partner of Huawei HarmonyOS. Looking at the employment level, the company's student employment rate remains high, with the average number of days of employment for programming students; the average salary performance is outstanding. According to Heima's 2023 employment report, the average salary of fresh graduates in first-tier cities in programming subjects exceeded 10,000 yuan/month. In March 2024, more than 20 students in the company's first Hongmeng online training camp won high-paying Hongmeng development positions. Among them, the salary of specialists was 10,000 to 30 million yuan/month. The 6th “Chuanzhi Cup” National IT Skills Competition was officially released during the reporting period. More than 1,400 colleges and universities participated, and the number of participants was more than 31,000. It is expected that the brand power and influence of teaching and research will continue to improve, helping students transform after future employment warms up.

Investment advice. According to the 2023 Annual Report, as the macro employment environment showed a steady growth trend throughout the year, corporate recruitment demand did not show an explosive recovery, resulting in weak performance and damage to enrollment or further pressure on performance, we adjusted the company's 2024-2026 net profit forecast to 1.1/1.5/190 million yuan, a year-on-year change of +593.5%/+37.0%/+28.3%, maintaining a “buy” rating.

Risk warning: Demand in the digital talent market is declining, industry competition is intensifying, and the company's performance falls short of expectations during the expansion process.