24Q1 revenue is under pressure in the short term, and full-year growth is expected to accelerate
The company released its 2024 quarterly report, achieving operating income of 1,035 million yuan, a year-on-year decrease of 14.66%, and net profit to mother of 489 million yuan, an increase of 18.64% year-on-year losses. The net cash flow outflow for the first quarter was 1,154 million yuan, an increase of 147.91% year-on-year. 2024Q1's revenue from sales of goods and services was 1,541 billion yuan, a year-on-year decrease of 14.75%. We expect the company's business to recover at an accelerated pace in 24 years and maintain profit forecasts. We expect revenue for 2024-26 to be 87.03/99.09/11.307 billion yuan, respectively. Referring to comparable company Wind's agreed average of 2.9 times 24 PS, considering the company's cloud business starting a second growth curve, the company will be given 3.8 times 24 PS and a target price of 79.21 yuan to maintain the purchase rating.
Customer demand recovered slowly in the first quarter. The main reason for the decline in revenue in the first quarter of the organizational structure adjustment was: (1) There was a brief rebound in customer demand in the same period in '23, and the current domestic macroeconomic environment is still recovering slowly. Downstream customers are still cautious about IT investment, and the 24Q1 company's new order situation is not ideal; (2) In order to adapt to market changes and enhance long-term competitiveness, the company made certain adjustments to the market sales strategy, personnel and organizational structure in the first quarter of this year, which had a certain impact on current results. 2024Q1's gross margin was 58.18%, down 3.93 pct year on year, and sales/management/R&D rates were 61.48%/8.74%/51.37%, respectively, up 6.34/1.07/3.63 pct year on year. The company's inventory at the end of the first quarter was 537 million yuan, an increase of 40.25% over the end of 2023. It was mainly strategic stocking to cope with rising prices of some raw materials.
Secure GPT empowers MSS to achieve positive results
The development of generative AI has lowered the threshold for cyber attacks, and hacker AI tools can quickly identify system vulnerabilities, produce cyber attack weapons in batches at low cost, and increase the intensity of cyber attacks. We are convinced that MSS is the first in the industry to implement secure hosting services based on large model technology with self-developed security GPT. After nearly half a year of trial, I am convinced that MSS has achieved outstanding results in reducing the workload of repetitive manual operations, improving adversarial recognition, and reducing the time required for in-depth analysis. At the same time, thanks to the power of secure GPT, I am convinced that MSS can bring 7*24 hours of security protection to customer systems and reduce the network security pressure brought about by the development of generative AI. Safety GPT will enable more products in the future, driving the company's continued growth in performance.
Continue to consolidate competitive advantage and win first place in the hyperconverged market
On the one hand, the company has been developing full-stack hyperconverged core virtualization technology for 13 years, and on the other hand, it is actively developing new technologies such as containerization and AI to continuously meet the new needs of customers. According to the “China Software-Defined Storage (SDS) and Hyper-Converged Storage (HCI) System Market Quarterly Tracking Report, 2023Q4” released by IDC on April 15, the company ranked first in the domestic hyperconverged market with a market share of 17.5%. The company continues to establish benchmark projects in the hyperconverged market, including the National Agricultural Cloud Platform and the JAC Automobile Group Cloud Platform. We believe that the company's competitive advantage in the hyperconverged market will continue to be strengthened, and the future will benefit from the recovery in enterprise demand to go to the cloud.
Risk warning: Cloud computing business promotion falls short of expectations; market competition intensifies.