Investment event: On April 16, 2024, the company released its 2023 annual report. During the reporting period, the company achieved operating income of 1,496 billion yuan, an increase of 25.18% over the previous year; realized net profit of 325 million yuan, an increase of 44.31% over the previous year; and realized deducted non-net profit of 187 million yuan, an increase of 1.57% over the previous year.

23 years of steady growth in performance and firm investment in R&D. During the reporting period, the company achieved net profit of 325 million yuan, an increase of 44.31% year on year; realized deducted non-net profit of 187 million yuan, an increase of 1.57% year on year, and profit increased rapidly throughout the year. Among them, Q4 achieved operating income of 403 million yuan, a year-on-year increase of 26.71%; realized net profit due to mother of 0.18 million yuan, a year-on-year decrease of 72.39%; and realized deducted non-net profit of 0.04 billion yuan, a year-on-year decrease of 91.73%. The main reason for the decline in Q4 profit was a decline in gross margin. The gross profit margin for Q4 alone was 32.55%, and the gross margin for the whole year was 38.66%. During the reporting period, the company continued to invest in research and development in AI and other businesses, build RiChai and AIBox, the artificial intelligence engine, and focus on developing next-generation AI products based on AI's capabilities in China and Taiwan. The company's R&D investment in 2023 increased by 26.97% over the same period last year, and the R&D expenditure ratio was 17.48%.

The collaborative office product business is expanding steadily, and state-owned clouds drive rapid growth in cloud and big data businesses. In '23, the company's collaborative office product line achieved revenue of 462 million yuan, an increase of 30.48% over the previous year. The company's RichMail Xinchuang Secure Email was widely recognized by the market and successfully expanded customers in the fields of transportation and finance on the B-side; the company combined the email with the GenAI model and connected basic models such as Wenxin Yiyun, Baichuan Intelligence, Zhi Spectrum ChatGLM, and Kimi to achieve the value of exclusive personal assistants and open up new space for email growth. 23 The company's cloud and big data business achieved revenue of 335 million yuan, an increase of 53.23% over the previous year. The growth rate was impressive. As the core supplier of mobile cloud certification, the company provides them with professional consulting services and solutions: assisting customers in business development and reuse solutions nationwide on the B-side to help promote Shengteng server products and expand businesses such as local power supply stations and satellite terminal platforms; developing smart cloud disk assistants on the C-side to achieve various generative intelligent functions and greatly increase user activity. In the future, the company is expected to continue to rely on the rapid development of state-owned clouds to continuously expand its business line and expand its business scale, and achieve rapid growth in performance.

Forward-looking AI and metaverse digital people consolidate the smart channel business, and innovative models ushered in growth opportunities. In 2023, the company's smart channel business achieved revenue of 616 million yuan, an increase of 23.00% over the previous year. On the one hand, the company stabilized its original business and successfully renewed key projects such as the China Mobile Phone Business Office and the ICBC Peony Card Center e-lifestyle platform; on the other hand, the company successfully expanded the online channel business in the energy industry by leveraging the advantages of operators in the field of electric channel construction and operation. With continued investment in the AI field, the company has incubated many commercial digital human products such as 5G video secretary, digital human outbound calling, and digital human asset management, which is expected to usher in more growth opportunities for the smart channel business.

Investment advice: Caixun shares benefit from industry trends such as AIGC applications, state-owned cloud growth, 5G technology applications, and metaverse digital people. While consolidating the original business, it continues to expand new businesses and products, and is expected to achieve continuous rapid growth.

Considering changes in the macroeconomic situation, the company's downstream customer budget may have shrunk. We expect the company to achieve revenue of 18.09/21.80/2,624 billion yuan in 24/25/26 (2.056/2,647 billion yuan before 24/25), an increase of 20.9%/20.5%/20.4% year-on-year; considering the continuous transformation of the company's R&D investment, the cost ratio is expected to continue to decline, and the company is expected to achieve net profit of 3.91/4.76/573 billion yuan in 24/25/26 (4.41/ 575 million yuan), an increase of 20.4%/21.8%/20.4% year-on-year. Considering the high quality of the company's track and the high growth potential of the business layout, we gave the company a “buy” rating.

Risk warning: AI technology implementation falls short of expectations, business progress is not as fast as expected, competition intensifies, etc.