Incident: Zhongwang Software released its 2023 annual report and 2024 quarterly report. The company achieved operating income of 828 million yuan in 2023, an increase of 37.71% over the previous year; achieved net profit of 61.41 million yuan, an increase of 922.84% over the previous year; and realized net profit without deduction of 77.74 million yuan. The company achieved revenue of 120 million yuan in 1Q24, an increase of 3.84% over the previous year; net profit to mother of 25.61 million yuan.
Comment:
The corporate sector and overseas markets continued to grow rapidly in 2023. The company's 4Q23 revenue growth rate reached 44.16%, which exceeded expectations. In 2023, the domestic business achieved revenue of 666 million yuan, an increase of 31.55%; of these, the commercial market achieved revenue of 501 million yuan, an increase of 43.66% over the previous year. The overseas business achieved revenue of 157 million yuan, an increase of 71.14% over the previous year. In terms of the company's own software, 2D CAD achieved revenue of 472 million yuan, an increase of 16.53% over the previous year. Among them, ZWCAD products in the enterprise sector achieved revenue of 303 million yuan, an increase of 33.48% over the previous year. 3D CAD achieved revenue of 188 million yuan, an increase of 16.28% over the previous year. Among them, ZW3D products in the enterprise sector achieved revenue of 134 million yuan, an increase of 28.35% over the previous year. CAE products achieved revenue of 7.15 million yuan, an increase of 209.67% over the previous year. The company completed the acquisition of fluid simulation software company CHAM, further improving product competitiveness. Bochao series products were added to the list. Among them, its own software generated revenue of 32.65 million yuan.
The education sector did not perform well in the first quarter, and orders for 3D products were good. The 1Q24 business sector maintained steady growth. Among them, the distribution team worked hard, and revenue increased by more than 35% year-on-year. Affected by the late resumption of work and classes in colleges and the delay in the disbursement of funds from education customers, the company's education sector performance in the first quarter fell short of expectations. However, overseas market revenue increased by nearly 50% year on year, order value for ZW3D products increased by more than 40% year on year, and customer recognition continued to increase. The revenue volume in the first quarter generally accounts for a small share of the whole year. It is recommended to pay attention to subsequent companies' product promotions.
Sales and R&D investment remained high. The company invested 404 million yuan in R&D in 2023, up 27.58% year on year, accounting for 48.79% of revenue, down 3.87 pct year on year. In order to ensure continuous product iteration and upgrading, the company continues to expand its R&D personnel team, and salary and office expenses continue to rise. The company's R&D personnel increased by 289 to 1,151, including the increase in R&D personnel brought about by the company's absorption of Beijing Bochao. The proportion of R&D personnel reached 54.34%, an increase of 4.37 pct over the previous year.
In 2023, the company generated 435 million yuan in sales expenses, with a sales expense ratio of 52.54%, a year-on-year decrease of 4.73 pcts. The main reasons for the increase in sales expenses are: 1) the expansion of the sales team and the increase in remuneration expenses; 2) the company has increased overseas market expansion, and travel expenses have increased a lot.
Investment advice: Maintain an “Overweight” rating. From 2024 to 2026, the company is expected to achieve revenue of 10.91/13.80/1,728 billion yuan, an increase of 31.82%/26.54%/25.17%; net profit to mother of 1.28/2.01/272 million yuan, an increase of 108%/57.3%/35.5% year-on-year.
Risk warning: Product sales and R&D iterations fall short of expectations.