Matters:
Recently, the company released its 2023 annual report and 2024 quarterly report: the company's revenue for 2023 was 1,976 billion yuan, down 18.43% year on year; net profit to mother was 106 million yuan, down 38.95% year on year; net profit after deducting non-net profit was 114 million yuan, down 32.36% year on year. The company's revenue for the first quarter of 2024 was 377 million yuan, down 19.29% year on year; profit due to mother was 0.17 million yuan, down 21.00% year on year; net profit after deducting non-return to mother was 17 million yuan, down 16.49% year on year.
Commentary:
Performance was under pressure in the short term, and the gross margin of the operation and maintenance business increased steadily. In 2023, the company achieved operating income of 1,976 billion yuan, a year-on-year decrease of 18.43%; net profit to mother was 106 million yuan, a year-on-year decrease of 38.95%; basic earnings per share were 0.25 yuan; and short-term performance was under pressure. Among them, IT infrastructure operation and maintenance service revenue was 970 million yuan, and gross margin was 39.12%, an increase of 0.61 percentage points over the previous year. The main reason was that the company further focused on the development of the main business, continued to promote digital construction and cost reduction and efficiency, optimized the cost structure, and maintained a steady increase in the gross margin of the main business. The decline in the company's performance narrowed in the first quarter of 2024, and we look forward to seeing the results of the company's digital construction.
The signing of the Bank's Xinchuang project contract progressed smoothly, and ecological cooperation closely followed industry trends. In 2023, the total number of contracts signed for the company's Xinchuang project was 299 million yuan, an increase of 136.41% over the previous year. Mainly due to favorable national Xinchuang industry policies, the company's customer resource advantages accumulated over the years can play an effective role in accelerating the implementation of business opportunities. Among them, the contracted customers are mainly in the banking industry, including Everbright Bank, China Construction Bank, etc. As the country's localization and the strategic process of Xinchuang progresses in an orderly manner, the company continues to expand in-depth cooperation with domestic manufacturers, reached cooperation agreements with 61 Xinchuang manufacturers throughout the year, and established close strategic partnerships with 25 companies. In addition to having already formed implementation projects in basic software and hardware, some application software, information security and other products and solutions, the company uses its advantages of rich technical experience, comprehensive capabilities, and wide geographical coverage of personnel to help some manufacturers deepen their service capabilities, reduce their service costs, and continuously improve customer satisfaction.
Investment advice: Affected by the pace of innovation, we lowered the company's profit forecast. The company's revenue for 2024-2026 is estimated to be 22.22 billion yuan, 24.66 billion yuan, and 2,715 billion yuan (the value before 2024-25 was 30.22 billion yuan and 3.353 billion yuan), and net profit to mother is 1.59, 181, and 209 million yuan, respectively (the value before 2024-25 was 243 million yuan and 275 million yuan). Based on the company's historical valuation level, the company was given 25 times PE in 2024, corresponding to a target price of 9.50 yuan, maintaining a “recommended” rating.
Risk warning: Competition in the industry intensifies, downstream demand release is insufficient, and the pace of innovation is falling short of expectations.