Description of the event

Seiyou Co., Ltd. released its 2023 annual report. In 2023, it achieved revenue of 1,829 billion yuan, up 7.71% year on year; net profit to mother of 83 million yuan, down 42.05% year on year; net profit after deducting non-return to mother of 61 million yuan, down 40.17% year on year; and achieved net operating cash flow of 244 million yuan, an increase of 171.99% year on year.

Incident comments

Overall profits were dragged down by the G-side. G-side revenue in 2023 was 738 million yuan, down 0.07% year on year; net profit loss to mother was 162 million yuan; the sharp decline in profit was mainly driven by a decline in gross margin. The company's G-side gross profit margin was 28.86% in 2023, compared to 40.16% in the same period last year.

B-side performance improved steadily. In 2023, the company's B-side revenue was 1.085 billion yuan, up 13.84% year on year, achieving net profit of 245 million yuan to mother, an increase of 37.37% year on year. Looking at details, the SME customer base achieved revenue of 540 million yuan (YoY 8.0%), 580,000 paying users (YoY -3.3%), and an ARPU value of 910 yuan (YoY 11.7%); the escrow customer base achieved revenue of 520 million yuan (YoY 24.0%), 5.1 million paying users (YoY 34.2%), and an ARPU value of 102 yuan (YoY -7.6%).

The company's performance in optimizing operating efficiency is obvious, and the cost control effect is remarkable. The company actively optimizes the personnel structure, increases the automation rate of operation, marketing and other processes, and focuses on high-value businesses with high potential for development. The company's fee control effect was remarkable in 2023. Among them, sales expenses increased 1.36% year on year, and management expenses increased 1.94% year on year, which is lower than the revenue growth rate of 7.71%.

Jin Si is driving the tax information technology market to sink and promote the development of fiscal and taxation SaaS services. With the full rollout of the Golden Fourth Project, China's tax supervision capacity is being strengthened, and the increase in corporate tax compliance requirements is a high-certainty event. At the same time, land finance is gradually weakening, and the government also urgently needs to find ways to raise fiscal revenue; tax supervision rules for small and medium-sized enterprises may move from “big and small” to comprehensive and strict supervision, or drive the B-side tax information technology market to sink, which is conducive to the promotion of standardized fiscal and taxation SaaS services.

Fiscal and tax data are expected to become a new driver for development. Fiscal and tax data elements can enable various businesses such as corporate marketing and credit finance.

The daily business data of the enterprise has been processed in compliance, which can better reflect the credit and risk situation of the enterprise, assist financial institutions in making loan decisions or risk reviews, and has a high value. Seiyou Co., Ltd. has accumulated data on the daily operations of many small and medium-sized enterprises. Currently, the legal authority and business model aspects of data use are still being explored; as exploration deepens in the future, fiscal and taxation SaaS software is expected to empower various businesses such as corporate marketing and credit finance in the future.

AIGC opens up space for long-term development. The company's AI capabilities can enable the G-side to reduce costs and increase efficiency on the B-side and increase value on the B-side. On the G-side, AIGC provides new impetus for the digitalization and intelligent improvement of tax collection and administration, empowering aspects such as data asset management and digital government intelligence; on the B-side, AI SaaS can intelligently identify and generate corporate fiscal and tax health levels, and intelligently generate personalized solutions and service plans, opening up room for long-term growth of the company's business.

Investment advice: Net profit due to mother for 2024-2026 is expected to be 2.52, 4.34, and 603 million, respectively. The corresponding PE is 34.4X, 20.0X, and 14.4X, respectively, maintaining the purchase rating.

Risk warning

1. The fiscal and taxation informatization construction policy fell short of expectations;

2. Competition in the fiscal and taxation SaaS service market increases risks.