Incident: The company released its 2023 annual report, achieving operating income of 7.662 billion yuan, +3.36%; net profit to mother of 198 million yuan, +1.89% year over year; net profit after deducting non-return to mother of 110 million yuan, +9.97% year over year; comprehensive gross profit ratio of 65.13%, +1.31pct year on year; the total growth rate of the company's three expenses (R&D, sales and management expenses) was 5.77%, of which sales expenses/management expenses were respectively 27.02/3.72/2,266 billion yuan, accounting for 35.26%/ 4.85%/29.58%
Revenue by business: 1) Cybersecurity business: Revenue of about 3.892 billion yuan, a slight decrease of 0.14% over the previous year. The cybersecurity business failed to achieve growth, mainly due to unsatisfactory new orders for mature product lines such as network-wide behavioral management AC, mobile security, and application delivery AD, while strategic businesses including XDR and secure hosting services (MSS) are still in the market exploration and education stage. 2) Cloud computing and IT infrastructure business: Revenue was about 3,090 billion yuan, up 8.07% year on year. Revenue from hyperconverged HCI products maintained a relatively steady growth. Hyper-converged HCI released a new version 6.9.0 in 2023. 3) Basic network and IoT business: Revenue of about 680 million yuan, an increase of 3.70% over the previous year. Among them, the growth rate of major wireless products increased, mainly reflected in key industries such as manufacturing, medical care, and higher education.
The company achieved a high increase in overseas revenue. Enterprise customers in the domestic market showed good resilience in their demand for IT construction. Customers in industries including energy and transportation maintained a high order growth rate, and the revenue growth rate of corporate customers reached 19.73%. At the same time, the revenue scale of overseas markets also continued to grow at a high rate, with a revenue growth rate of 47.98%.
The company adheres to the “AI First” strategy and has released an upgraded version of Secure GPT 3.0. We are convinced that using “AI First” as an innovative research strategy, AI technology and capabilities are continuously implemented in various products, such as secure GPT, SAVE 3.0, NoDR, AIOps, etc., and following the release of the self-developed security model “Secure GPT” in 2023, the company released the upgraded version of Secure GPT 3.0, the AI computing power platform, and the EDS 520 storage version in the spring of 2024.
Profit forecast: The company is a leader in cybersecurity, and also focuses on cloud computing, IT infrastructure, and IoT businesses. We expect the company to achieve net profit of 299/4.51/604 million yuan in 2024/2025/2026, an increase of 51.18%/50.72%/34.02% over the previous year, giving it a “buy” rating.
Risk warning: Industry development, company business progress, profit forecasts and valuations fall short of expectations.