Investment events: The company released its 2024 annual report: 2023 operating income of 4.507 billion yuan, up 1.58% year on year; net profit to mother was 741 million yuan, up 18.37% year on year; net profit after deducting non-return to mother was 471 million yuan, down 9.61% year on year.
Revenue continues to grow steadily, and innovative businesses have achieved rapid growth. Revenue in 2023 was 4.507 billion yuan, up 1.58% year over year. Innovative businesses have achieved rapid growth. The new business segments include cloud-related security, data security 2.0 & 3.0, industrial internet security, and secure operations, achieving revenue of 2.142 billion yuan, an increase of 13.82% over the same period last year, accounting for 47.54% of annual revenue, and a further increase in the share of new business revenue. Among them, the cloud-related security business achieved revenue of 572 million, an increase of 34.50% over the same period of the previous year, and the security operation center business achieved revenue of 1,061 million yuan, an increase of 13.01% over the same period last year, showing initial results in creating new quality productivity. The company is actively expanding the new Internet communication sector, continuously consolidating collaboration and integration with China Mobile, continuously improving the company's core competitiveness, and achieving steady revenue growth.
The level of profitability is leading in the industry, and production efficiency has improved significantly. In 2023, the company's net profit to mother was 741 million yuan, an increase of 18.37% over the previous year, and the profit level remained leading in the industry. The company's cost reduction and efficiency effect was obvious. The total three-fee investment decreased by 11.69% compared to the same period last year, and the three-fee rate decreased by 6.8 pcts. Revenue per capita increased significantly, up 7.83% year over year. The company achieved positive results in reducing costs, increasing efficiency, and controlling expenses. The company's sales/R&D/management expenses in 2023 were 10.32/1.93/815 million yuan respectively, down 11.18%/7.65%/13.23% year-on-year.
The synergy with China Mobile's business has been outstanding, and the role of ESG in sustainable development is highly valued. The company actively promoted high-quality business collaboration and implementation with China Mobile, achieved comprehensive integration between headquarters, province and city, and signed 62 strategic cooperation agreements with China Mobile Group and its subsidiaries. The business synergy effect is obvious in the direction of jointly building integrated security operation centers, secure clouds, dedicated line guards, and AI security models. The company's new technology was rapidly commercialized, and the new customer base was beginning to take shape. The revenue growth rate of identity trust products and 5G+ industrial Internet security inspection products all exceeded 200%; data security management platforms, network security shooting ranges, full traffic detection, Xinchuang firewalls, and EDR all achieved a growth rate of more than 50%. The company is actively developing new individual/family customer groups, including 3 million mobile cloud computer users, 50,000 Qingsong Guan users, and the number of users is beginning to take shape. During the reporting period, the company's net assets to its mother surpassed 10 billion dollars for the first time, an increase of 62.29% over the previous year, and the asset quality was high, and capital holdings increased by 4,047 billion yuan. The ability to withstand external risks and the momentum for business innovation and growth increased significantly. The company has always promoted the construction of a “three meetings and one level” governance system to improve the level of risk management and internal control; standardize the operation of listed companies to protect the legitimate rights and interests of investors; attach great importance to the role of ESG in sustainable development, and further promote the integration of ESG management into corporate governance.
Investment advice: Considering that the current macroeconomic recovery falls short of expectations, we adjusted the company's profit forecast. The company's total revenue for 2024-2026 is 52.92 billion yuan, 63.87 billion yuan, and 7.687 billion yuan, respectively (the previous forecast values were 71.41 billion yuan and 8.930 billion yuan); net profit to mother is 929, 11.96 billion yuan, and 1,449 billion yuan (the previous forecast values were 1,209 million yuan and 1,478 billion yuan). The company's 2024/2025/2026 EPS was 0.97/1.26/1.52 yuan respectively (the previous forecast value was 2024/2025 EPS was 1.27/1.55 yuan), giving it a “buy” rating.
Risk warning: business development falls short of expectations, seasonal sales risks, increased competition in the information security industry, policy risks