Revenue is growing steadily, waiting for gross margin to recover
In 2023, the company achieved revenue of 5.234 billion yuan (yoy +25.90%), net profit to mother of 1,822 billion yuan (yoy -152.40%), and deducted non-net profit of 1,887 billion yuan (yoy -147.25%). The sharp decline in profit was mainly due to falling gross margin and preparation for significant goodwill impairment. The company achieved revenue of 110 billion yuan (yoy +6.27%) and net profit of 8.8373 million yuan (yoy -19.73%) in 24Q1. Considering the company's increased investment in new business areas and increased competition in the industry, we expect the company's net profit to be 2.51/3.58 billion yuan (24-25 previous value: 3.6/50 billion yuan) in 24-26. Referring to the average PE value of comparable companies, we give it 43 times PE in 24 years, corresponding to a target price of 13.49 yuan/share, maintaining an “increase in holdings” rating.
Expanding 5G messaging and multi-scenario AI applications, the international cloud communication business grew rapidly in 2023. The company's cloud communication business revenue was 4.812 billion yuan, +25.90% year over year, other cloud business was 422 million yuan, +56.15% year over year; international business revenue was 606 million yuan, +181.49% year over year. During the reporting period, the company signed comprehensive 5G messaging platform cooperation agreements with the three major domestic telecom operators to create 5G messaging core solutions to promote large-scale development of rich media messaging services; cooperated with the Huawei Pangu model to enhance 5G messaging AI capabilities and enhance intelligent service level and business value; overseas, the company cooperated with more than 1,200 overseas operators to vigorously develop the rich media messaging RBM platform and successfully signed Telkomsel, the largest operator in ASEAN. According to the company announcement, 24Q1's international business revenue increased more than year-on-year 80%, target revenue of over 700 million and profit of over 70 million for the full year of '24.
The slowdown in the growth rate of service SMS led to a decline in gross margin. Expense rate control was 6.28% of the company's overall gross profit margin in 2023, a year-on-year decrease of 3.06 pct, mainly due to a decline in service information business volume and increased industry competition; the 1Q24 gross profit margin was 8.57%, a year-on-year decrease of 0.98 pct, and there was a month-on-month recovery. As the company continues to reduce costs and increase efficiency, the gross margin of the cloud communications business is expected to bottom out and rise. The company's 23-year sales/management/finance/R&D expense ratios were 3.60/2.82/0.70/ 2.02%, respectively, -0.81/+1.00/+0.06/-1.23pct, respectively. The year-on-year increase in management expenses was mainly due to the impact of share payment expenses during the reporting period, and the year-on-year increase in financial expenses was mainly affected by exchange gains and losses.
Optimistic about the company's long-term development and maintaining the “gain” rating
Considering the company's increased investment in new business areas and increased competition in the industry, we expect the company's net profit to be 2.51/3.58 billion yuan (24-25 previous value: 3.6/50 billion yuan) in 24-26. Referring to the average PE value of comparable companies, we give it 43 times PE in 24 years, corresponding to a target price of 13.49 yuan/share, maintaining an “increase in holdings” rating.
Risk warning: 5G news falls short of expectations; operator price increases risk; market competition increases risk.