Key points of investment:
The company released its 2023 annual report and 24Q1 financial report. According to the announcement, the company achieved revenue of 2,254 billion yuan for the whole year, yoy -0.75%; realized net profit of 255 million yuan, yoy +1.98%. 24Q1 achieved revenue of 540 million yuan, yoy +4.51%; realized net profit of 0.2 billion yuan to mother, turning a year-on-year loss into a profit. The 23-year results were slightly lower than expected, mainly due to the decline in revenue from major customers and changes in the pace of order confirmation; the 24Q1 results were in line with expectations.
Performance is under pressure in the short term, and gross margin is basically stable. According to the company's announcement, the pan-ERP business achieved revenue of 1,219 billion yuan for the full year of '23, yoy -1.7%, gross profit margin of 31.92%, a year-on-year decrease of 0.78 pct; the intelligent manufacturing business achieved revenue of 830 million yuan, yoy +2.56%, and gross margin of 43.16%, up 0.01 pct year on year. All business lines are under pressure, and gross margins are stable.
The decline in revenue from major customers has had a big impact. According to the company's announcement, among the company's main sales customers, sales of the largest customer reached 620 million yuan, and sales of the largest customer in the same period in 2022 were 80 million yuan. The decline in revenue from major customers had a significant impact. It is speculated that the peak period for major customer system replacement and construction has passed, and the trend will remain relatively stable or slightly declining in the future.
New energy customers are the focus of subsequent expansion. According to the company's announcement, orders for the full year of '23 were +8.7% YoY. In terms of the industry market, customer orders in the new energy sector increased 137% year over year. More than 230 new customers were added throughout the year, accounting for 21.66% of the total number of customers, laying a good foundation for continued market expansion in subsequent years.
Partnering with Huawei to create a new domestic industrial software ecosystem. According to the company's announcement, the company is deeply involved in the construction of the Huawei industrial software system and jointly released independently innovative industrial software based on IDMe with Huawei. It is expected that it will continue to benefit from the promotion of domestic industrial software systems based on the Huawei system in the future.
AIGC explores the middle ground for a big model of manufacturing. According to the company's announcement, during the reporting period, the company released the AIGC platform, a major manufacturing service model, and became one of the first partners of Huawei's “Pangu Big Model”, forming a systematic enterprise service model to provide enterprises with capabilities such as multi-model docking, vector management, and pre-training and application of private models. It is expected to achieve rapid growth in the future as large model capabilities improve.
Maintain a “buy” rating. As the downstream boom fell short of expectations, combined with the 23-year performance falling short of previous expectations, and AI products being in the R&D and promotion stage, the main reason was to reduce the company's pan-ERP business growth rate, raise R&D and sales expense ratio forecasts, comprehensively lower the 24-25 profit forecast, and add a 26-year profit forecast. It is expected to achieve revenue of 27.1, 3.29, and 4.10 billion yuan in 24-26 (previously forecasted revenue of 3.46 billion yuan and 4.60 billion yuan in 24-25), and net profit to mother of 3.1, 3.9, and 50 million yuan (previously forecast net profit to mother of 4.0 million yuan and 530 million yuan in 24-25). Hande Information, Central Control Technology, Baoxin Software, and Dingjie Software were selected as comparable companies in the same field of intelligent manufacturing, and the company was given a 24-year PE 30x (average of comparable companies) to maintain a “buy” rating.
Risk warning: Downstream sentiment recovery falls short of expectations; AI business promotion falls short of expectations; demand from major customers falls short of expectations.