On April 25, 2024, the company released its 2024 quarterly report. The company's revenue for the first quarter was 2.06 billion yuan (YoY +36.02%) and net profit to mother was 247 million (YoY +4.75%). Revenue slightly exceeded expectations.

Revenue growth exceeded expectations, and gross margin improved month-on-month. The main reason for the high increase in the company's revenue was due to the increase in revenue after the merger and acquisition of CICC Payments and CCIC Smart Exchange, but this also led to changes in the company's revenue structure and a decline in gross margin. The company's gross margin for 2023Q1 was 33.29% (YOY-6.18pct, QoQ+0.7pct). In addition to changes in the business structure due to mergers and acquisitions of companies, 2024Q1 also saw a year-on-year decline due to excessive sales of non-cash domestic smart financial equipment with low gross profit margins, and overseas high-margin equipment deliveries in the first quarter were also average. What can be expected, however, is that with overseas and high-margin equipment sales throughout the year, the company's gross margin is expected to continue to improve month-on-month throughout the year.

“AI+ data elements” are developing in both directions and continue to develop the digital economy industry ecosystem. In terms of AI, the company is building intelligent computing centers such as the Guangzhou Artificial Intelligence Computing Power Center and the Radio, Television and Transportation Cloud Data Center around the “Four Clouds and Two Centers”. The company's Radio and Television Wuzhou is Huawei's Kunpeng OEM partner and Shengteng AI strategic partner, providing customers with domestic high-performance computing products and various computing power solutions.

The company continues to build a data industrial park, promote the introduction of data service providers, provide new infrastructure adapted to the development of digital economy business and data business, and build a diversified data element ecosystem data element business. At the same time, the company has set up digital economy investment and operation companies in Guangzhou Conghua, Guangzhou Huadu, Qingyuan, Shanwei, Jieyang, Maoming, Pingdingshan, Longyan, etc., to actively help build digital governments and smart cities, and actively expand public data operations.

“Industrial+capital” two-wheel drive lays a solid foundation for subsequent growth. Through internal acceleration of digital technology R&D and management mechanism innovation, the company is stepping up efforts to invest in the industrial chain and carry out mergers and acquisitions to comprehensively promote high-quality business development. For internal R&D inventions, the company has established a “General Research Institute+Professional Research Institute” R&D organization system. It has a professional R&D team of over 2,600 people, led by academicians, including doctorates and masters. R&D investment has accounted for more than 10% of revenue for 5 consecutive years. In terms of capital operation, the next two years will also be a big year of mergers and acquisitions for central enterprises. The company has had many successful mergers and acquisitions in recent years (CICC Pay, CICC Smart Exchange). At the same time, the company also has excellent cases of splitting and listing Zhongke Jiangnan. The company has 10.188 billion dollars in cash in hand in 2024Q1, and related mergers and acquisitions are also worth looking forward to.

Profit forecast: The company's revenue for 2024-2026 is expected to be 103.69/118.00/13.539 billion yuan, respectively, and net profit attributable to mother is 10.83/12.61 billion yuan, respectively, maintaining the “buy” rating.

Risk warning: The development of the data element industry falls short of expectations, macroeconomic growth falls short of expectations, overseas business expansion falls short of expectations, valuation models and profit forecasts fall short of expectations