Core views
The company released the 2023 annual report and the report for the first quarter of 2024. In 2023, it achieved revenue of 7.662 billion yuan, net profit to mother of 198 million yuan, net profit deducted from non-return to mother of 110 million yuan; in the first quarter of 2024, it achieved revenue of 1,035 million yuan, net profit to mother of 489 million yuan, and net profit without return to mother of 510 million yuan. The company focuses on the fields of network security and cloud computing, and actively promotes AI product security GPT to empower its various product lines and gain user recognition. The company has performed positively in overseas markets and has continuously achieved rapid growth, which is expected to improve the company's overall operating level. The short-term performance of the industry is currently under pressure due to weak domestic macroeconomic recovery. We forecast revenue for 2024-2026 to be 8.291 billion yuan, 9.112 billion yuan, and 10.064 billion yuan, respectively, up 8.21%, 9.90%, 10.45% year on year, and net profit to mother will be 268 million yuan, 357 million yuan, and 505 million yuan, respectively, up 35.52%, 33.48%, and 41.34% year-on-year, corresponding to PE85/64/45 times, maintaining the “buy” rating.
occurrences
On April 26, Convinced released its report for the first quarter of 2024. In the first quarter of 2024, the company achieved revenue of 1,035 billion yuan, a year-on-year decrease of 14.66%; realized net profit of 489 million yuan, an increase of 18.64% over the previous year; realized net profit without return to mother - 510 million yuan, an increase of 19.65% over the previous year. Earlier, the company released its 2023 annual report. For the full year of 2023, the company achieved revenue of 7.662 billion yuan, a year-on-year increase of 3.36%; realized net profit of 199 million yuan, an increase of 1.89% over the previous year; and realized net profit without return to mother of 110 million yuan, an increase of 9.97% over the previous year.
Brief review
The company's performance is under pressure in the short term, affected by slow recovery in customer demand and organizational restructuring.
The company's revenue and profit performance in the first quarter was weaker than in the same period last year, mainly due to (1) a brief rebound in customer demand in the same period last year, the current domestic macroeconomy is still in a weak state of recovery, and the company's new orders in the current period are not ideal; (2) in order to adapt to market changes and enhance long-term competitiveness, the company adjusted its sales side strategy, personnel, and organizational structure in this quarter, and it will take some time for the adjustment to show results. The company's various expense ratios have increased year over year, mainly due to relative fixed expenses, and the decline in the revenue side has led to an increase in cost rates.
The commercialization of secure GPT is something to look forward to. The company actively embraces AI and released the first domestic enterprise-level security language model, Secure GPT, in 2023, which has now been iterated to version 3.0. Secure GPT is an intelligent assistant for NLP's secure operation, and has the ability to detect, investigate and handle high-traffic attacks and phishing attacks, and its performance far exceeds the detection capabilities of traditional security equipment. Secure GPT has now enabled MSS products to help customers efficiently handle network security pressure under AIGC. In the future, Safety GPT will continue to iterate and is expected to empower the company's other product lines and drive continued growth in the company's performance.
The company actively expands overseas business and opens up incremental market space. Currently, the domestic macroeconomy is in a weak recovery cycle. Overall IT investment by users is cautious, and the domestic market is under high competitive pressure. The company actively invests in product research and development, talent training and other resources in overseas markets to actively expand overseas markets. In 2023, the company's overseas business revenue continued to rise, with a revenue scale of 346 million yuan, and a sales percentage of 4.52%, an increase of 1.37 percentage points over 2022. The overall competitive pressure in overseas markets is low, the gross margin level is higher than the domestic market, and the market space is broad. The company continues to expand in overseas markets and is expected to usher in good development opportunities.
Investment advice: The company focuses on the fields of network security and cloud computing, and actively promotes AI product security GPT to empower its various product lines and gain user recognition. The company has performed positively in overseas markets and has continuously achieved rapid growth, which is expected to improve the company's overall operating level. Under the current weak domestic macroeconomic recovery, the short-term performance of the industry is under pressure. Based on the company's performance for the first quarter of 2023 and 2024, we forecast revenue for 2024-2026 to be 8.291 billion yuan, 9.112 billion yuan and 10.064 billion yuan respectively, up 8.21%, 9.90%, and 10.45% year-on-year respectively, and net profit to mother of 268 million yuan, 357 million yuan, and 505 million yuan, up 35.52%, 33.48% and 41.34%, corresponding to PE85/64/45 times PE , maintaining a “buy” rating.
Risk analysis
1) Macroeconomic recovery falls short of expectations: the company's cybersecurity industry is directly affected by the scale of downstream customer informatization investment. In the context of weak recovery, the scale of customer-related investment is limited, and new orders may be pressured; 2) Increased industry competition: the degree of homogenization of industry products is high, and competition within the industry may increase when the overall size of the market is stable, leading to a decline in profit margins; 3) The commercialization process of new products falls short of expectations: The company's secure GPT products have been empowered by some products, but subsequent iteration and the progress of empowering other products may be affected by R&D investment, technology iteration, market expansion, etc. Influenced by various factors; 4) Overseas business development falls short of expectations: The company has actively deployed overseas markets in the past two years and has continuously achieved high revenue growth rates. The current international situation is uncertain, which may affect the overseas landing of the company's products, leading to a slowdown in overseas business revenue