23Q4 single-quarter results are under short-term pressure, and profitability is expected to recover in 24 years
The company released its 2023 annual report, achieving operating income of 1,681 billion yuan, a year-on-year decrease of 36.06%, achieving net profit to mother of 977 million yuan, and a profit of 29 million yuan for the same period in '22. Among them, 23Q4 revenue was 474 million yuan, a year-on-year decrease of 61.80%, and net profit to mother was 453 million yuan, a year-on-year decrease of 260.38%.
Operating cash flow in 2023 - $202 million, compared to $60 million for the same period in '22. In 2023, the company's revenue from sales of goods and services was 2,257 billion yuan, a year-on-year decrease of 16.34%. Considering the gradual recovery of the company's business in 2024, we expect the company's revenue for 2024-2026 to be 20.31/23.88/2,816 billion yuan, respectively. Referring to the comparable company Wind, it agreed to expect an average of 3.7 times 24 PS, giving the company 3.7 times 24 PS and a target price of 9.26 yuan, maintaining an increase in holdings rating.
Safety product revenue declined a lot, leading to a decline in overall revenue. The biggest drop in government market revenue was 46.15%, a year-on-year decrease of 16.13pct. Judging from the revenue structure, the safety products business revenue was 784 million yuan, -53.18%, gross profit margin 54.05%, year-on-year -14.92 pct; security service business revenue was 730 million yuan, -5.64% year on year, gross profit margin of 46.29%, year-on-year -13.32pct.
Telecom operators/ energy and enterprises/ financial/ government, public institutions and other revenues were $4.81/2.82/227 billion, respectively, -16.39%/-33.43%/-30.01%/-52.95%, gross margins were 42.94%/44.90%/51.06%/47.85%, respectively, -7.73/-19.07/-18.34/-17.22pct.
The decline in revenue has put pressure on short-term expense rates. Cost reduction and efficiency may be reflected in the decline in the company's revenue in 2024, mainly due to the gradual recovery of the domestic economy but the slow recovery of the safety investment pace of downstream customers, reduced customer budgets in some key industries, intense industry competition, lagging tendering, lengthening procurement processes, and the increase in the number of major new platform projects signed by the company, lengthening the project execution cycle, and the corresponding extension of the revenue recognition cycle. In 2023, the company's sales/management/ R&D rates were 51.56%/11.77%/37.43% respectively, up 18.27/4.65/14.65pct year-on-year. The number of employees in the company was 3,976, a year-on-year decrease of 17.78%. The per capita income was 422,700 yuan, a year-on-year decrease of 120,000 yuan. We see that the company has begun to optimize its personnel structure. It is expected that the results of reducing costs and increasing efficiency in 2024 will be reflected, and the cost rate is expected to decrease during this period.
R&D closely followed industry needs, and the cloud security and security model accelerated implementation. In 2023, the company added more than 2,000 new SaaS service subscribers, and the subscription service retention rate for old customers was close to 90%. The company released the Fengyunwei model. Using the company's extensive knowledge base in the field of security, it has the level of junior attack and defense experts, empowers more than 500 security operation scenarios, reaches advanced domestic levels in terms of average detection/response time, etc., and has been successfully tested by operators, financial and other industry customers. We believe that the company has strong R&D capabilities in the field of information security, and the ability to quickly follow up and meet the new needs of the industry.
Risk Warning: Increased pressure on government spending; increased market competition