Investment event: On April 12, the company released its 2023 annual report. In 2023, the company achieved operating income of 6.503 billion yuan, a year-on-year decrease of 3.01%; net profit of 655 million yuan, an increase of 2.59%; net profit after deducting non-return to mother of 645 million yuan, an increase of 4.80% year-on-year.
Revenue was under pressure in the short term, and the software business continued to grow steadily. In 2023, the company achieved revenue of 6.503 billion yuan, a year-on-year decrease of 3.01%. By business: 1) System integration business revenue was 1,229 billion yuan, a year-on-year decrease of 18.42%, mainly affected by downstream customer acceptance progress. By the end of 2023, the total contract amount for the company's unimplemented system integration projects was about 2.5 billion yuan, laying the foundation for a rebound in future system integration business revenue growth; 2) Software business revenue continued to grow positively, achieving revenue of 5.260 billion yuan, an increase of 1.45% over the previous year. By industry, acceptance of some projects was delayed, and customer IT budgets were adjusted in the short term; insurance IT business revenue was 3.598 billion yuan, down 1.29% year on year; uninsured financial IT achieved revenue of 517 million yuan, up 3.43% year on year; the government sector achieved business revenue of 1,068 billion yuan, up 8.72% year on year; and the healthcare sector achieved sales revenue of 297 million yuan, down 5.75% year on year, mainly affected by the high healthcare IT revenue base in 2022 and the company's project signing and execution cycle.
Profitability continues to improve, and R&D innovation is increased. The company's profitability was further enhanced. The gross margin of the company's main business reached 31.45% in 2023, up 2.27% from the same period last year; the net profit margin reached 10.07%, up 0.55% from the same period last year.
In 2023, the company's R&D expenses were 943 million yuan, an increase of 4.84% over the previous year. The R&D direction mainly revolved around the transformation opportunities brought by AI models to software development, and focused on promoting the R&D of vertical MaaS platforms in various industry application fields.
The “Insurance+” strategy, internationalization strategy, and “flywheel” strategy create new points. At the beginning of 2023, the company proposed a “flywheel” development strategy, using its core competitive advantages in insurance IT and other fields to continuously expand the direction of business development to create new points. “Insurance+” revenue grew rapidly, achieving revenue of 130 million yuan, an increase of 55.66% over the previous year. Under the internationalization strategy, customers outside the mainland achieved revenue of 235 million yuan, an increase of 15.41% over the previous year. Based on the company's traditional advantages and business stability, it is expected to achieve new breakthroughs through the “Insurance+” strategy, internationalization strategy, and “flywheel” strategy.
Investment advice: According to the company's 2023 annual report, and the growth rate of fintech investment is slowing down, we have adjusted 2024 and 2025 to add profit forecasts for 2026. It is predicted that the company's revenue for 2024-2026 will be $6.88/73.43/8.027 billion ($83.36/9.425 billion yuan in 2024-2025, respectively), and net profit to mother of $7.20/8.32/987 million (2024-2025, respectively), corresponding PE will be 23/20/17 times, respectively, maintaining a “buy” rating.
Risk warning events: business development falls short of expectations, slow policy progress, untimely data updates, etc.