Accruing impairment affects profits and maintains a “buy” rating

Guangting Information released its annual report. In 2023, it achieved revenue of 639 million yuan (yoy +20.46%), net profit to mother of 154.656 million yuan (restated YOY -148.55%), and deducted non-net profit of 22.295 million yuan (yoy -217.52%).

Among them, Q4 achieved revenue of 247 million yuan (yoy +20.33%, qoq +106.45%) and net profit to mother of 18.848 million yuan (yoy -155.77%, qoq -174.33%). The main reason for the decline in profit was asset impairment losses of RMB 66 million (impairment losses of RMB 0.05 billion for the same period in '22) and credit impairment losses of RMB 33 million (impairment losses of RMB 17 million for the same period in '22). We expect the company's 2024-2026 EPS to be 0.47, 0.59, and 0.74 yuan respectively. Comparatively, the company Wind unanimously expected an average PS value of 5.2 times in 24, giving the company 5.2 times PS in 24, with a target price of 44.27 yuan, maintaining a “buy” rating.

The main cockpit business is growing steadily, and the intelligent driving business is growing rapidly

By business, the company in 2023:1) The smart cockpit business achieved revenue of 325 million yuan, an increase of 16.9%.

The traditional core advantage business maintained steady growth; 2) The intelligent driving business achieved revenue of 230 million yuan, an increase of 38.6%, of which autonomous driving software development revenue was 58 million yuan, an increase of 212.6%. Among them, AVM and APA solutions both achieved breakthroughs in the OEM business. Intelligent connected vehicle testing revenue was 110 million yuan, an increase of 33.2%, mobile map data service revenue of 35 million yuan, a decrease of 12.0%, and digital space governance revenue of 28 million yuan, an increase of 8.8%; 3) New energy business revenue 0.79 100 million yuan, a decrease of 4.7%, affected by the overall decline in investment and demand in the electric motor drive industry. The company's intelligent driving business continues to grow rapidly, and intelligent automobiles are driving the company's revenue growth.

Impairment affects profits and cash flow has improved

In 2023, the company's gross profit margin was 35.2%, the year-on-year +1.6 pct, the sales/management/R&D expenses ratio was 5.02%/11.41%/8.07%, and the year-on-year +0.76pct/-1.88pct/-4.81 pct. The management and R&D expenses rate declined. Profit was mainly due to impairment losses. The company's shareholding company, Wuhan Zhonghaiting Data Technology Co., Ltd. lost money. The company confirmed an investment loss of 0.18 million yuan. Zhonghaiting's performance continued to lose money for two years and losses showed an expanding trend. The company accrued large impairment reserves of 49 million yuan for its long-term equity investments and 0.07 billion yuan for bad debts on its accounts receivable. The company benefited from annual revenue growth and repayment collection. Net operating cash flow was 42,140 million yuan, +147.52% over the same period last year.

Benefiting from smart driving trends, AI technology enables development

Benefiting from the trend of intelligent driving, the company has achieved business breakthroughs in many domestic automakers, including Geely Krypton and Dongfeng Motor, with self-developed AVM (360° Surround View Imaging) and APA solutions.

In terms of AI technology, the company's super software factory has begun to use AI in the instrument business to achieve batch requirement extraction, demand structuring, and demand differentiation, and automated code generation and testing through an intelligent development platform. We believe that the company has a good development platform and intelligent component foundation. With the construction of a semi-automated software development platform with human-robot collaboration, development efficiency may be further improved.

Risk warning: The automobile intelligence process falls short of expectations; macroeconomic fluctuations.