Yuxin Technology's 1Q24 performance is in line with our expectations
Yuxin Technology announced 1Q24 results: revenue of 601 million yuan, -24.3% year on year; net profit to mother of 32 million yuan, -23.3% year on year, net profit not attributable to mother of 31 million yuan, or -15.2% year on year. The results were in line with our expectations.
Development trends
The decline in the system integration business affected revenue, and the increase in the share of the software business led to gross margin repair. 1) Revenue side: Software business revenue was 396 million yuan, -1.4% YoY, accounting for 66.0%, +15.5ppt; system integration business revenue was 178 million yuan, or -50.2% YoY. According to public results, the main reason was that order confirmation was lower than expected. Revenue from innovative operations was RMB 26 million, -22.0% year-on-year. According to the public results meeting, the company expects to gradually secure revenue in 2Q24. 2) Margin side: 1Q24's gross profit margin was 26.4%, +4.4ppt year over year. This is an increase in the share of software development and service businesses, and its gross margin was +1.5ppt year over year. 3) Net profit side: Net interest rate to mother was 5.3%, +0.1ppt year on year. After excluding share payment fees, non-net profit of 47 million yuan was deducted, +26.9% year-on-year. 4) Orders and cash flow: 1Q24's contract debt was $425 million, down 1.8% from the end of the previous year; cash received from sales of goods and services of 618 million yuan, -8.01% over the same period last year.
Control R&D manpower efficiency and high-quality projects, and continue to advance the integrated two-pronged strategy. 1) In terms of software business, the company focuses on gross margin repair and uses it as the most important assessment indicator for project screening. During the reporting period, the company joined hands with Starlink Technology to create a joint solution; it won the bid for the Changshu Agricultural Commercial Bank big data base procurement project to help improve the bank's data capabilities. 2) In terms of innovative business, in January 2024, the company collaborated with a leading commercial bank to create an innovative case for personal loan management. 4Q23 signed a strategic cooperation with Xiamen Asset Management, and the company is expected to achieve revenue generation in 2Q24. 3) In terms of overseas business, the project has high gross profit characteristics. The company has been expanding overseas markets for 5 years. In 2024, the company is expected to build a benchmark business to seize the second growth curve. 4) In terms of ecological cooperation, during the reporting period, the company initiated cooperation with Huawei Kunpeng's native application development and continued to iterate new versions of Kunpeng's commercial software. The latest Hongmeng HarmonyOS NEXT mobile finance development platform launched by Yuxin Technology in April 2024 has officially been gradually implemented for financial institutions.
Profit forecasting and valuation
We keep our 2024/2025 profit forecast unchanged, and maintain an industry rating and target price of 17 yuan, corresponding to 31x/26x 2024/2025e P/E. We have 27.9% upside compared to the current stock price, and are currently trading at 24x/20x 2024/2025e P/E.
risks
Demand for innovative businesses falls short of expectations, overseas policy risks, and AI deployment progress falls short of expectations.