Description of the event
On March 25, 2024, Hang Seng Electronics announced its 2023 results: in 2023, the company achieved revenue of 7.281 billion yuan, +11.98%; realized net profit attributable to mother of 1,424 billion yuan, +30.50% year over year; realized net profit without return to mother of 1,448 billion yuan, +26.51% year over year. Looking at a single quarter, 4Q23 achieved revenue of 2,914 billion yuan, +5.36% year over year; realized net profit of 818 million yuan, -24.27% year over year; realized net profit after deduction of 911 million yuan, +11.86% year over year.
Incident comments
The company's business situation is steady, and revenue is supported by diversified revenue. By business line, asset management technology services achieved revenue of 1,712 billion yuan in 2023, +9.27% over the same period last year. O45 completed full-stack Xinchuang R&D, signed 53 new customers, and completed 24 customers. Among them, the completion of key projects such as Huabao Fund's O45 project was a good start for subsequent batch delivery. Wealth Technology Services achieved revenue of 1,734 billion yuan in 2023, +4.27% year-on-year. The main reason for the slowdown in growth is that the market's demand for Xinchuang products has not been fully released. The business level progressed steadily. UF3.0 completed the pilot launch of the Xinchuang full-link transaction at China Merchants Securities and entered the batch launch stage of Xinchuang. Operational and institutional technology services achieved revenue of 1,436 billion yuan in 2023, +14.32% year-on-year. In the field of operation and management, the new generation of TAs signed nearly 100 new customers and completed the launch of leading customers; 18 Internet TAs were launched; the next-generation valuation system signed more than 30 customers and replaced friends with leading fund customers. The growth rate of the rest of the business is stable, forming an effective and diversified support for revenue. Risk and platform technology/data services/innovation/enterprise finance, insurance core and financial infrastructure technology business revenue was RMB 5.09/3.85/5.56/700 million yuan, +19.06%/+19.27%/+12.48%/+23.10% compared with the same period last year. In 2023, the company's cash inflow from sales of goods and provision of services was 7.415 billion yuan, +11.02% year-on-year, and growth was also steady.
The increase in gross margin proved the company's good quality of development, and the R&D cost ratio remained high and a stable competitive moat. The company's gross profit margin in 2023 was 74.84%, up 1.28pcts year-on-year. The continuous increase in gross margin proved the high quality of the company's development. On the cost side, the company invested 2,661 billion yuan in R&D in 2023, with a rate of 36.55%, maintaining a high position. The company lays out AI in a forward-looking manner, applies AI technology to introduce data services into more application scenarios, so that more businesses can provide services using the SaaS model, seize the opportunities brought by technological progress such as big models, continuously provide new driving force for Hang Seng's growth, and stabilize the long-term moat.
The company's business goals for 2024 are to maintain steady revenue growth, continuously improve the quality of the company's revenue, keep expenses below revenue growth, continue to improve operating efficiency, and maintain a steady financial structure and operating cash flow. We expect the company's revenue from 2024 to 2026 to be 80.3/88.8 billion yuan, and net profit to mother will be 17.3/19.6/2.13 billion yuan, respectively, corresponding to 22.5/19.8/18.2 times PE, respectively, to maintain a “buy” rating.
Risk warning
1. Competition in the financial IT industry intensifies risks;
2. Technological development falls short of expected risks.