Overall, the first quarter was under pressure, and revenue declined year over year. The company released its 24Q1 financial report, with revenue of 1,035 million yuan (-14.66%), net profit attributable to mother of 489 million yuan (-18.64%), and net profit not attributable to mother of 51 million yuan (-19.65%). Mainly, the 24Q1 company's order situation is still sluggish. Demand rebounded briefly in the same period last year, and the current economic recovery is still slow. The company made some adjustments to its marketing and sales strategy, personnel and organizational structure in the first quarter of this year, and is expected to gradually pick up in the second quarter.
The company's active preparation of goods affects cash flow, and cost control continues. The company's gross profit margin was 58.18%, down 3.93 percentage points from the previous year. The main reason was the rise in raw material prices. For this reason, the company also made strategic preparations. Net cash flow from operating activities - $1,154 million, a significant decrease, mainly due to the increase in the purchase of raw materials and payment of year-end bonuses compared to last year. Among them, cash payments for goods and services increased by about 370 million compared to 23Q1, mainly purchasing raw materials and preparing goods. The company's inventory also increased by 250 million compared to 23Q1.
In terms of expenses, the company's sales, management, and R&D expenses changed year-on-year to -4.84%, -2.74%, and -8.17%, and overall expenses are still shrinking.
Continued technological cultivation eventually paid off, and the company's hyperintegrated market share rose to number one. According to IDC data, in the fourth quarter of 2023, the company's hyperconvergence ranked first in the country with a market share of 22.1%; throughout 2023, the company's hyperconvergence ranked first in China's hyperconvergence market with a market share of 17.5%. The company began developing its own virtualization technology in 2011, quickly achieving the third largest share of the market and breaking through to number one this year. In the context of localization, the company currently not only performs against VMware to achieve smooth migration and replacement, but also achieves better performance in technologies such as hot upgrades and DRS intelligent scheduling. The company's cloud desktop business is also number one in the market. With Citrix announcing its withdrawal from the Chinese market, the company is expected to gain more market share. At the same time, IDC data shows that the company's application delivery AD once again topped the 2023 Q4 list with a 23% market share; it maintained the number one market share in the country for two consecutive years in 2022 and 2023, and surpassed F5 in many technologies. From the security industry to the field of cross-border cloud computing, the company gradually surpassed foreign vendors and formed an alternative through deep technological development.
AI security is still the best practice in IT scenarios, and the company's security GPT achieves “human-robot common understanding”. In 2018, the company took the lead in implementing MSS, a secure hosting service in China to explore SecOps enabled by AI. Combining user interaction and safe operation in current real scenarios, a powerful “data flywheel” of “big model+data+security and algorithm experts” has been formed. Currently, in the implementation of 5000+ users and four major industrial security operation centers, it has been highly recognized by users in various industries, and is expected to become a must-have for IT security operations and other teams.
Risk warning: Macroeconomics affects IT spending; industry competition intensifies; new business expansion falls short of expectations.
Investment advice: Maintain profit forecasts and maintain a “buy” rating. The estimated revenue for 2024-2026 is 84.09/95.44/11.139 billion yuan, with growth rates of 10%/14%/17%, respectively, and net profit to mother of 421/6.94 billion 925 million yuan, corresponding to the current PE of 54/33/25 times, maintaining the “buy” rating.