occurrences
The company released its 2023 annual report, and achieved operating income of 359 million yuan for the full year of 2023, up 5.54% year on year; net profit to mother was 67 million yuan, down 37.26% year on year, and net profit after deducting 58 million yuan, down 41.36% year on year. The company announced the 2023 profit distribution plan. A cash dividend of 2.00 yuan (tax included) will be distributed for every 10 shares. There will be no share transfer, no capital increase from the capital reserve fund, and the corresponding dividend payment ratio is 33.48%.
In Q4 alone, 2023Q4 achieved operating income of 122 million yuan, a year-on-year decrease of 27.05%; net profit to mother was 0.28 million yuan, a year-on-year decrease of 64.38%, and net profit after deducting non-return to mother was 0.26 million yuan, a year-on-year decrease of 65.87%.
At the same time, the company released its 2024 quarterly report. In the first quarter of 2024, it achieved operating income of 49 million yuan, an increase of 36.35%; net profit to mother was -0.1 billion yuan, a year-on-year decrease of 163.42%, after deducting net profit not returned to mother of -13 million yuan, a year-on-year decrease of 171.92%.
reviews
Development in fields such as cloud service providers and operators has achieved remarkable results
By business, the company achieved revenue of 0.56, 1.3, 1.08, and 0.49 million yuan in 2023, respectively, with revenue of 0.56 million yuan, 1.3, 1.08, and 0.49 million yuan, compared with the same period of year, of +21%, +1.6%, -25%, and +273%, respectively. The corresponding revenue accounts for 16%, 36%, 30%, and 14%, respectively. Among them, the decline in cryptographic system revenue was mainly affected by the decline in sales in the securities industry. The main reason was the increase in the share of end customers among the company's customers (the company's final customer revenue share reached 29% in 2023, an increase of about 11 pcts compared to 2022. We believe it is related to the company's active development of cloud service providers and operators in the field of cloud service providers and operators (considering that cloud service providers and operators are basically direct customers).
Furthermore, in 2023, the company acquired Jiangnan Keyou, a cryptographic manufacturer in the financial sector, which contributed to a certain increase in the company's performance. According to the company's announcement, Jiangnan Keyou achieved a total revenue of 86 million yuan and net profit of 29 million yuan from the date of purchase until the end of 2023. Jiangnan Keyou occupies a dominant position in cryptographic applications in important industries such as finance. The company has completed a board restructuring with Jiangnan Keyou. In the future, it is expected to be deeply integrated with Jiangnan Keyou, share market channels and customer resources, broaden downstream application scenarios, and form good industrial synergy effects.
Short-term cost investment has put pressure on profits. Continuing to build cryptographic chip technology barriers The company's sales, management, and R&D expenses increased 71%, 48%, and 44% year-on-year respectively in 2023, and 2024Q1 sales, management, and R&D expenses increased 61%, 34%, and 40% year-on-year respectively. The main reason was that the company increased the number of various personnel and increased expenses brought about by the acquisition of Jiangnan Keyou, which led to a decline in the company's short-term profit pressure.
In the long run, the company continues to build technical barriers for R&D, which is expected to provide the company with continuous product competitiveness and drive revenue and profit growth. Duofang Semiconductor Co., Ltd., a wholly-owned chip subsidiary of the company, launched three new cryptographic security chips in 2023, including the XT100, XT200, and XR100, which simultaneously mass-produced the chips and successfully applied them to the market. Among them, XR series chips can provide the highest random number generation rate in the industry. The XT series chips can effectively meet the security requirements of cryptographic chips in IoT scenarios through rich interface support, efficient cryptographic calculation, and excellent energy consumption control.
Profit forecasting and valuation
Considering the revenue and profit boost brought by the company's acquisition of Jiangnan Keyou, and the short-term pressure on profits, we lowered our previous profit forecast. The company's 2024-2026 operating income is 4.57/5.56/667 billion yuan, and net profit to mother is 0.85/1.17/151 million yuan. Referring to the closing price on April 19, 2024, the corresponding price-earnings ratio is 38/28/22 times, respectively. Considering that the company's layout in the field of cryptography and IoT chips has long been beneficial to maintaining the competitiveness of the company's products, broadening the company's market boundaries and maintaining a “buy” rating.
Risk warning
The implementation process of self-developed IoT chips fell short of expectations; industry competition intensified; implementation of cryptographic industry policies fell short of expectations; loss of technical talent, etc.