Key points of investment:
Incident: On April 10, 2024, Shanghai Steel Union released its 2023 annual report, achieving operating income of 86.31 billion yuan, an increase of 12.73% over the previous year, and a net profit of 240 million yuan to mother, an increase of 18.30% over the previous year. 23Q4 achieved operating income of 19.767 billion yuan, a year-on-year increase of 12.61%, and realized net profit to mother of 73 million yuan, an increase of 12.58% over the previous year.
Net profit attributable to mother is within the performance forecast range. The earnings forecast announced a net profit of 208-265 million yuan to mother for 23 years, which was actually 240 million yuan, which is in the middle of the forecast range.
The revenue growth rate of the two pillar businesses went hand in hand, and gross margin declined. Among them, the revenue of industrial data services in 2023 was 802 million yuan, up 15.99% year on year, and the gross profit margin was 57.02%, down 4.30% year on year, mainly affected by rising costs; steel trading service revenue was 85.432 billion yuan, up 12.71% year on year, and gross profit margin was 0.91%, down 0.14% year on year, mainly due to the decline in industry profit margins.
The number of end users and advertisers of industrial data services is growing rapidly, and data terminals may be a new growth point.
The number of web and mobile users grew by more than 10% in '23. Data terminals were added, and the number of registered users, active users, and paid users grew faster, reaching 49.5%, 24.07%, and 42.17%, respectively.
The AIGC application was launched, making it the first major vertical language model for the commodity industry. During the reporting period, the development of the 1.0 version of the “Ganglian Grandmaster” vertical language model for the commodity industry was completed, and based on three scenarios of trade, analysis, consultation, and content generation in the commodity industry, Xiaogang Digital Intelligent Assistant was successfully developed.
Having a high-quality database for the steel industry directly benefits from digital asset registration. The “Interim Provisions on Accounting Processing Related to Enterprise Data Resources” issued by the Ministry of Finance officially came into effect on January 1, 24. Data assets that meet the conditions can be directly entered into the table.
The quality and breadth of the company's data are in a leading position in the industry. The registration of digital assets helps to increase the company's value and enables the market to more accurately evaluate the company's actual value.
Profit forecasts and ratings. Due to the company's change in the e-commerce business revenue recognition method, revenue declined but gross margin increased. The 2024 revenue forecast was lowered to 97.410 billion yuan, and the original forecast was 126.180 million yuan. Considering the company's increased investment in consulting business and large steel models, the 2024 net profit forecast was lowered to 281 million yuan, compared to 380 million yuan. The additional revenue forecast for 2025-2026 was 1118.82 billion yuan, 12.072 billion yuan, and the net profit forecast was 342,401 million yuan. Corresponds to 22x PE in 2024, maintaining a “buy” rating.
Risk warning. Increased market competition has led to the risk of continued decline in gross margin, policy implementation falling short of expectations, continuous decline in customer unit prices, and the actual impact of AIGC applications falling short of expectations.