Event Overview:
On April 18, Shenzhen Sanda released the “2023 Annual Report”. In 2023, the company achieved operating income of 56.284 billion yuan, an increase of 10.25% year on year; net profit due to mother was 330 million yuan, up 308.1% year on year; net profit without return to mother was 685.83 million yuan, turning a loss into a profit year on year.
Net profit increased significantly in 2023. Looking at the improvement in project payback and improved operating cash flow, ① High-tech industry engineering service revenue was 51.757 billion yuan (YoY +13.1%). It is a leading enterprise in the field of engineering services for the high-tech industry, providing various industrial services such as clean room engineering consulting, design, digital delivery and operation and maintenance. By continuing to increase the number of designers, the company increased the scale of consulting design revenue. By the end of 2023, the total number of designers in this sector was 3,198, an increase of 216 over the beginning of the year. In 2023, the company achieved total consulting and design business revenue of 443 million yuan (YoY +80.66%). The improvement in the company's design capabilities is also reflected in the increase in EPC business revenue. In 2023, the EPC business signed a new contract amount exceeding 16 billion yuan (YoY +60%). In recent years, along with the trend of China's high-end manufacturing enterprises shifting industries to overseas, especially countries along the “Belt and Road”, the company has seized the rapid growth opportunities of overseas markets, especially the Southeast Asian market, and completed the implementation of several projects in Southeast Asian countries such as Vietnam and Thailand, with a new contract amount exceeding 1 billion yuan. ② The revenue from digital and information services was 2,215 billion yuan (YoY -16.25%), and gross margin was 31.64% (YoY+4.44pct). ③ Revenue from digital heating and new energy services was 1,974 billion yuan (YoY -0.89%), and gross margin was 15.32% (YoY+0.29pct). ④ Revenue from services in other industries was $338 million (YoY -48.28%).
In 2023, the company's sales/management/R&D expenses were 1.71%/3.09%/3.26%, respectively, -0.08/-0.48/+0.27pct. The company invested 1,855 billion yuan (YoY +20.81%), accounting for 3.3% of revenue, and 4,544 R&D personnel (YoY +62.46%). Personnel growth mainly comes from high-tech engineering business and digital business.
In 2023, net cash flow from operating activities was 655 million yuan (YoY +365.46%), mainly due to the high-tech industry engineering service business increasing project repayment collection efforts. The increase in project repayment was higher than the increase in payments.
Accelerate the layout of data elements and provide reliable computing power infrastructure
Since the establishment of the National Data Administration in October 2023, more than 20 provincial administrative regions across the country have set up local data authorities, and the development of local data element markets has accelerated. The National Data Administration, together with various ministries and departments, issued the “Data Element ×” Three-Year Action Plan (2024-2026) in December 2023, which focuses on activating the potential of data elements in 12 industries and promoting the new business format of data element value creation to become a new driving force for economic growth. The company has taken the lead in product and technology research and development in the fields of data tools, data security and data materialization. In the field of public data, the company has built public data resource centers for local governments in Shenzhen, Hunan, Sichuan, Nanyang, Guangzhou and Zengcheng, etc., to achieve a “data empowerment and collaborative intellectual governance” digital government model. It has sorted out more than 1 million catalogues and gathered more than 400 billion pieces of data to help local governments serve more than 10 million business entities and more than 100 million individual entities. Since the establishment of the National Data Bureau, the company has signed data operation cooperation agreements with Hebei Province, Shijiazhuang, Dalian, Tangshan, Shenyang, Changchun and other cities to participate in the design of products such as “Oyster Insurance” and “Wedding Letter” to achieve value discovery and value-added preservation of public data assets.
“China Electronics Cloud” is the only cloud platform under China Electronics. After years of research and development, it has formed core self-developed products such as the exclusive cloud platform software CECSTACK, the distributed storage software CEAStor, and the server virtualization software CeAsphere, to build a high-security computing infrastructure for customers, and output diverse heterogeneous computing power, advanced memory, and efficient carrying capacity. In 2023, it achieved operating income of 1,097 billion yuan (YoY +262.17%) and net profit of -9.3 billion yuan. The company actively expanded its digital and information service business during the reporting period, and revenue increased dramatically. At the same time, in order to enhance the company's core R&D capabilities in the key technology field of “Cloud Digital Intelligence”, the company continued to increase investment in R&D, so there was a temporary increase in losses.
Investment advice:
Shenzhen Sanda is a leading enterprise in the field of engineering services for the high-tech industry. As a second-tier state-owned enterprise under China Electronics, it focuses on the two main businesses of “cloud” and “digital” in China's electronic autonomous and secure computing industry chain, and is expected to benefit from multiple opportunities such as state-owned clouds, data elements, and AI models. The company's revenue for 2024-2026 is estimated to be 633.21/709.26/79.401 billion yuan, respectively, and net profit to mother is 4.06/492/593 billion yuan, respectively. Maintaining a buy-A investment rating, a 6-month target price of 21.40 yuan is given, which is equivalent to 60 times the price-earnings ratio in 2024.
Risk warning:
Research and development of new products and technologies fell short of expectations; implementation of data element policies fell short of expectations.