Introduction to this report:
The company's performance fell short of expectations, and there is still some pressure on short-term recovery. Currently, it has been actively controlled in terms of expenses, and it is expected that it will still be able to maintain high profit margins in the future
Key points of investment:
The target price was lowered to $20.65 to maintain the “Overweight” rating. Based on our judgment on industry sentiment and the latest financial data, the profit forecast was lowered. EPS for 2024-2026 is expected to be 0.79 (-0.13), 0.94 (-0.22), and 1.07 yuan, respectively. Referring to the average of 26.20 times PE of comparable companies in 2024, the target price was lowered to 20.65 yuan, and the “gain” rating was maintained.
Short-term results were under pressure and fell short of expectations. In 2023, the company achieved operating income of 2,254 billion yuan, a year-on-year decrease of 0.75%, and achieved net profit of 255 million yuan, an increase of 1.98% over the previous year. Both were lower than expected and below the lower limit of the performance forecast. Although 2024Q1's business performance has improved, considering the impact of Snoop's merger, the actual business situation is still under some pressure.
Major customers are dragging down the pan-ERP business, and the intelligent manufacturing business is still stable. In 2023, revenue from the largest customer fell by 22.63%, and the share of revenue fell further to 27.5%. The reduction in IT investment by major customers affected the growth rate of the general ERP business, but it also showed that other ERP and self-developed platforms for non-large customers progressed smoothly and at a faster rate. The intelligent manufacturing business achieved annual revenue of 829 million yuan, an increase of 2.56% over the previous year. It is basically close to the pan-ERP business. It has become another cornerstone business of the company, and the gross margin is stable at a high level.
Actively implement cost reduction and efficiency, and it is expected that profit margins will remain high in the future. Under pressure on the company's operations, operating cash flow has not deteriorated significantly, and gross margin remains high, which indicates to a certain extent that the company's business philosophy has changed from scale expansion to focus on the quality of growth. Three fees declined to varying degrees in 2024Q1. In the context of fee control, the company is expected to maintain stable profit margins in the future, and the profit growth rate is expected to continue to outperform revenue growth.
Risk warning: competition increases risk, risk of rising labor costs