Incident: The company released its 2020 23 annual report. The company's revenue for 2023 was 56.3 billion yuan, up 10% year on year, and net profit to mother was 330 million yuan, turning a loss into a profit. The performance was in line with market expectations.
Key points of investment
Significant improvement in business quality: by business, the company's revenue from high-tech industry engineering services in 2024 was 51.7 billion yuan, up 13% year on year, gross profit margin 10.11% (year on year -0.1 pct); digital and information services revenue was 2.2 billion yuan, down 16% year on year (mainly due to active contraction partial integration projects), and gross profit margin of 31.64% (+4.44pct year on year). Under the premise of a year-on-year increase in R&D expenses, sales and management expenses were properly controlled. The net cash flow from operating activities reached 655 million yuan at the end of 2023, which changed from negative to positive year-on-year, and the quality of operations improved markedly.
The market share of electronic cloud continues to increase: the company's China Electronics Cloud has iteratively released the CECSTACK V5 integrated computing power platform for intelligent computing centers and supercomputing centers during the reporting period. On the basis of the original government clouds in Dali, Suining, etc., China Electronics Cloud has newly constructed various government cloud construction projects such as Wenzhou Xinchuang Cloud, Shanghai's Huangpu District Xinchuang Cloud, and Beijing Internet Court Xinchuang Cloud, which supported the construction of intelligent computing centers in Shijiazhuang, Wuhan, Beijing and other places, targeting central state-owned enterprises in key industries. During the reporting period, the company built Xinchuang Cloud for China Southern Power Grid, Sinopec, Dongfeng Motor, etc., and participated in POC tests for various central enterprise projects. At the same time, “China Electronics Cloud” has built a high-security computing power service center in Shunyi, Beijing, to provide core computing power infrastructure for state-owned central enterprises, government affairs, and the national financial cloud.
By the end of 2023, the company had built a total of 24 operating cloud projects in use or under construction. We expect the gross margin level of the company's cloud business to continue to rise in 2024.
Public data licensing operations are progressing rapidly: The company independently developed and formed a series of self-developed products such as data resource platforms, data asset registration platforms, data operation service platforms, and data trading platforms, and began exploring public data licensing operations with several cities. In the field of public data, the company has built public data resource centers for various local governments across the country, such as Shenzhen, Hunan, Sichuan, Nanyang, and Guangzhou Zengcheng, to achieve a “data empowerment and collaborative intellectual governance” digital government model. It has signed data operation cooperation agreements with Hebei Province, Shijiazhuang, Dalian, Tangshan, Shenyang, Changchun and other cities to participate in the design of products such as “Oyster Insurance” and “Wedding Xinbao” to achieve value discovery and value-added preservation of public data assets. We expect the company's public data licensing operation to continue to advance rapidly in 2024. In the field of central state-owned enterprise customers, the company uses cloud-native big data platforms and data center products to provide global data governance services that support PB-grade massive data, 10,000-level data tables, and 1000-level real-time computing links for large central state-owned enterprises such as CNOOC, China Chemical, and Guangdong Airport to promote the launch of CNOOC's intelligent oil field, integrated launch of China's chemical industry and finance, Nanjing Port industrial chain collaboration, and Guangdong Airport data catalogue.
Profit forecast and investment rating: Considering the rapid improvement in the operating quality of the company's electronic cloud and other businesses, we adjusted the 2024-2025 EPS forecast from 0.45/0.96 yuan to 0.53/0.70 yuan, and the estimated EPS in 2026 will be 0.86 yuan. We are optimistic that Shenzhen Sanda relies on China Electronics, has a first-mover advantage in data infrastructure and public data operations, has a stable leading position in high-tech industrial engineering, and maintains a “buy” rating.
Risk warning: Competition in the industry is intensifying, and policy progress falls short of expectations.