Matters:
Guanglianda released its 2023 annual report. In 2023, the company achieved operating income of 6.563 billion yuan, a year-on-year decrease of 0.42%, and realized a net profit of 116 million yuan to mother, a year-on-year decrease of 88.02%.
Commentary:
Performance fell short of expectations, and profit side was clearly under pressure. Revenue side: In 2023, the company achieved total revenue of 6.563 billion yuan, a year-on-year decrease of 0.42%, and achieved net profit of 116 million yuan to mother, a year-on-year decrease of 88.02%.
Q4 2023 achieved revenue of 1,783 billion yuan, a year-on-year decrease of 16.26%; net profit to mother was -146 million yuan, a year-on-year decrease of 144.44%. The main reason for the decline in full-year profit was increased sales expenses and increased asset impairment. Expense side: The company's sales team expanded, and sales expenses increased 18.79% year on year. Sales, management, and R&D expenses rates were 30.6% (+4.95pp), 19.3% (+0.61pp), and 28.9% (+5.88pp), respectively.
The digital cost business bucked the trend and stabilized, and the new digital cost business can be expected to develop. In 2023, the company's digital cost business revenue was 5.170 billion yuan, up 8.33% year on year, and signed cloud contracts of 3,564 billion yuan, down 9.08% year on year. Excluding the impact of the three-year contract, it was basically the same year on year. The cloud transformation of the cost business was ahead of schedule, and product renewal rates remained high, partially offsetting changes in the revenue side industry. Among them, new digital cost products achieved cloud revenue of 598 million yuan, a year-on-year increase of 52.36%, and signed cloud contracts of 540 million yuan, a year-on-year decrease of 21.5%. Digital new cost products focused on benchmarking projects in 2023, focusing on customer value realization. The product renewal rate continues to rise, and is close to the renewal rate level of cost products. The company laid out the digital new cost business early, and has created several benchmark cases, which is expected to release broad growth space through improved downstream demand.
Digital construction optimization is focused, and overseas business is arranged in an orderly manner. Affected by factors such as the progress of construction project commencement and increased competition in the industry, the company's construction business achieved revenue of 860 million yuan, a year-on-year decrease of 35.0%. The company actively adjusted and focused on project quality, continued to increase the proportion of self-developed software and hardware, increased business profitability and cash flow management, and achieved an increase in sales payback compared to 2022. EquaSimulation AB (Sweden), an overseas energy simulation software company acquired by a subsidiary, was merged in 2023 to help the overseas business achieve revenue of 190 million yuan, an increase of 26.4% over the previous year, and the overseas business progressed steadily and in an orderly manner.
Optimize internal management and focus on implementing strategies to reduce costs and increase efficiency. In the context of short-term performance under pressure, cost reduction and efficiency may create certain profit margins. The company stated that it will further increase internal exploration, strive to reduce costs and increase efficiency, effectively control costs at the source and process, and reduce unnecessary expenses. It is expected that in 2024, the company will actively strengthen internal management and optimize the personnel structure in a targeted manner. Short-term profits may be affected by internal optimization costs. In the medium to long term, improvements in internal efficiency are expected to be reflected in cost-side optimization, which is expected to bring some profit margin.
Investment advice: The company's cost business base is stable, and profit recovery is expected in the medium to long term through cost reduction and efficiency strategies. Considering the frictional costs caused by short-term internal optimization and the impact of external industry sentiment, we expect 2024-2026 revenue to be 71.03, 75.41, and 7.971 billion yuan, and net profit to the mother of 4.15, 5.28, and 662 million yuan, corresponding EPS of 0.25, 0.32, 0.40 yuan/share. Referring to comparable company estimates, the company was given 3.5xPS in 2024. The corresponding target price was 14.93 yuan, and the rating was downgraded to “recommended”.
Risk warning: New product promotion progress falls short of expectations, and construction industry restoration progress falls short of expectations.