1Q24 revenue was in line with our expectations, and net profit was lower than our expectations
The company announced results for the first quarter of 2024:1Q24 revenue of 132 million yuan, up 19.36% year on year; net profit loss of 13.61 million yuan year on year, from profit to loss (profit of 12.21 million yuan in the same period last year); net profit after deducting non-return to mother of 14.24 million yuan, from profit to loss year on year (profit of 9.16 million yuan for the same period last year). 1Q24 revenue was in line with our expectations; net profit performance fell short of our expectations, mainly due to higher than anticipated cost increases due to increased headcount.
Development trends
1Q24 The company's revenue grew well, and expenses increased rapidly due to personnel growth. Expense control is expected to be strengthened throughout the year. The company's 1Q24 revenue increased 19.36% year-on-year to 132 million yuan. We expect the steady development of electronic treasury payments throughout the year, and the revenue of the budget unit cloud platform and industry electronic business is expected to continue to grow rapidly. The company's 1Q24 gross margin fell 3.3ppt to 56.7% year on year, and 1Q operating costs, sales expenses, management expenses, and R&D expenses were +29.0%/+75.4%/+41.2%, respectively. We believe that due to the expansion of the company's personnel size and the increase in equity incentive expenses, the total number of employees in the company increased 13% year over year at the end of 23; on a month-on-month basis, 1Q24 sales expenses, R&D expenses, and management expenses changed by -35%/-2%/+7%. We expect the company to strengthen the control of expenses throughout the year.
Accounts receivable increased year-on-year at the end of the quarter, and 1Q operating cash flow was under pressure. Net cash flow from 1Q24 operating activities was $195 million (-$88.87 million in the same period last year); of these, cash received from 1Q sales of goods and provision of services decreased 27.5% year over year to 74.78 million yuan; 1Q's cash outflow from purchasing goods and providing labor payments increased 76.3% year over year to 104 million yuan. 1Q24 credit impairment losses of 4.02 million yuan (700,000 yuan in the same period last year) are believed to be due to an increase in bad debt accruals due to an increase in accounts receivable; accounts receivable at the end of 1Q were +120% year-on-year to $415 million.
The draft amendment to the Accounting Law was submitted for review. The company is deeply involved in the construction of digital finance and accounting data elements, and has development opportunities. According to Xinhua News Agency, on April 23, 2024, a draft amendment to the Accounting Law was submitted for review. The draft amendments focus on improving the accounting system, strengthening accounting supervision, and strengthening the security of accounting information. We believe that this revision may further strengthen financial supervision and improve the quality of accounting information. The company is deeply involved in the construction of national digital finance, accounting data elements, etc., and can help customers establish financial capital and business management systems from centralized treasury payments to integrated budget management. We believe that the company has development opportunities in the context of digital finance construction and accounting information security construction.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains unchanged. The current stock price corresponds to the 2024/2025 price-earnings ratio of 30.9 times/24.6 times. Maintaining an industry rating and a target price of 75.00 yuan, corresponding to 39.2 times the price-earnings ratio of 2024 and 31.2 times the price-earnings ratio of 2025, there is 26.9% upside compared to the current stock price.
risks
The implementation of the policy fell short of expectations; the expansion of new industries fell short of expectations.