Brief performance review
On April 26, 2024, the company released its 2024 quarterly report. The company achieved revenue of 1.29 billion yuan in the first quarter of 2024, up 0.9% year on year; gross profit of 40 billion yuan, down 2.0% year on year, gross margin was 31.0%, down 0.9 pct from the same period last year; net profit to mother was 0.26 million yuan, up 12.4% year on year; net profit to mother after deducting non-current profit and loss was 0.24 million yuan, up 48.8% year on year.
Management analysis
The company's gross margin declined slightly in the first quarter of 2024. Combined with the 26.8% year-on-year decline in system integration business revenue in the fourth quarter of 2023, we believe that the main reason is that some of the systems integration businesses with low gross margins were deferred to confirm revenue until the first quarter of 2024, thus affecting overall gross margin performance. In terms of expenses, due to the company's improvement in quality and efficiency and the number of employees falling 6.3% year on year in the first quarter of 2024, the sum of the company's three fees fell 8.7% year on year; the growth rate of the sum of the three fees was slower than the company's revenue growth rate, so the company achieved a high increase in net profit without deduction in the first quarter of 2024. In terms of receipts, the company received 940 million yuan in cash from sales of goods and services in the first quarter of 2024, a year-on-year increase of 19.9% when this base was high in the first quarter of 2023. We believe this was mainly due to the deferral of some receipts at the end of 2023 to the first quarter of 2024.
Throughout the year, we pay attention to the implementation results of the company's “Insurance+” and internationalization strategies. In 2023, the company's “Insurance+” related revenue was 130 million yuan, an increase of 55.7% over the previous year; as the company continues to explore new business models and development directions and continues to develop in the fields of health, transportation, consumption, safety, etc., we also maintain positive expectations in 2024. In terms of internationalization, customers outside the mainland achieved revenue of 235 million yuan in 2023, an increase of 15.4% over the previous year. They are also developing businesses in East Asia, Southeast Asia, South Asia, etc., and the company is expected to launch more projects in 2024.
Profit Forecasts, Valuations, and Ratings
Based on the company's 2023 annual report and expectations for steady growth in the industry, we expect the company's revenue from 2024 to 2026 to be 70.9/74.2/7.77 billion yuan, up 9.1%/4.6%/4.7% year on year; net profit to mother will be 6.9/7.8/860 million yuan, up 5.2%/13.7%/10.4% year on year, corresponding to 24.0/21.1/19.1 times PE, respectively, to maintain the “buy” rating.
Risk warning
Premium income and insurance IT investment fell short of expectations; “Insurance+” or overseas business development fell short of expectations; AIGC's enabling effects fell short of expectations; and executives and major shareholders risked reducing their holdings.