Matters:
On April 25, 2024, the company released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved operating income of 436 million yuan, an increase of 0.14%; net profit to mother of 12 million yuan, an increase of 122.19% year on year; loss of non-net profit deducted from mother was 0.06 million yuan, an increase of 92.78% year on year. With 2024Q1, the company achieved operating income of 59 million yuan, a year-on-year decrease of 1.02%; net profit to mother - 0.1 billion yuan. The loss margin narrowed, and the year-on-year increase was 29.04%.
Commentary:
Revenue increased slightly, and annual profit broke out of the trough. In 2023, the company achieved operating income of 436 million yuan, a year-on-year increase of 0.14%; net profit to mother of 12 million yuan, an increase of 122.19% year on year; deducted non-net profit loss of 06 million yuan, an increase of 92.78% year on year, successfully breaking out of the profit trough. With 2023Q4, the company achieved operating income of 177 million yuan, an increase of 6.43% year on year; net profit to mother was 0.27 million yuan, an increase of 984.84% year on year.
The main business continues to focus on deepening the digitalization of the industry. In 2023, the boom in the housing construction industry fluctuated, the growth rate of infrastructure investment declined, and government investment projects showed a shrinking trend. Facing changes in the industry, the company attached importance to management risk management and control, paid close attention to order quality and repayment work, and improved the quality of operations. Revenue structure 1) Building informatization software business: generated revenue of 218 million yuan, an increase of 14.86% over the previous year. While actively consolidating its dominant position within Zhejiang Province, the company actively explores markets outside the province. The business in Zhejiang Province continued to grow, and revenue outside Zhejiang Province increased by more than 35% over the same period last year. 2) Smart construction site business: generated revenue of 218 million yuan, a year-on-year decrease of 11.24%. Despite a certain decline in sector revenue, order quality improved markedly, repayments increased dramatically, and operating quality improved markedly, and reflected in operating cash flow. Operating cash flow increased 106.49% year-on-year in 2023.
The ability to control expenses has been improved, and the cost rate during the period has been drastically reduced. In 2023, the company continued to promote comprehensive budget management, strengthen cost control and optimize the internal R&D personnel structure, strengthen the labor efficiency of sales staff, and focus on improving the efficiency of cost and cost ratio, significantly reducing period expenses. The total management expenses, sales expenses, and R&D expenses decreased by 57.7728 million yuan over the same period last year, a decrease of about 15%. By category, the company's sales, management, and R&D expenses rates in 2023 were 37.15%, 12.29%, and 28.09%, respectively, down 3.63pp, 1.65pp, and 8.11pp from the previous year.
We are actively exploring AIGC applications in the construction field, and have achieved some research and development results. At this stage, the company's R&D focuses on the application of aPaaS platforms, BIM 3D basic graphics platforms and AI technology in traditional software and smart terminals, and has obtained some R&D results in AIGC technology enabling software functions: in the field of AI technology machine vision, AI panoramic high-point inspection robots have been iteratively optimized; at the level of algorithm application, identification tasks for key scenarios such as engineering progress, construction safety, and efficiency have been added, enriching identification scenarios to further accurately grasp project progress and safety hazards. With AIGC, the company's product functions are expected to continue to be rich, helping the product usage value to grow steadily.
Investment advice: Considering the frictional costs of short-term internal optimization and the impact of external prosperity in the construction industry, we expect operating income of RMB 4.40, 4.56, and 467 million yuan for 2024-2026, and net profit of RMB 0.16, 0.20, and 0.24 million yuan, corresponding to EPS of 0.21, 0.25, and 0.30 yuan/share, maintaining a “neutral” rating.
Risk warning: Competition in the industry intensifies, and the release of downstream demand falls short of expectations.