The company publishes an annual report for '23 and a quarterly report for '24. In '23, we achieved revenue of 610 million yuan (+5.3% YoY), net profit attributable to mother of 90 million yuan (-5114.8% YoY), and deducted non-net profit of 180 million yuan (-130.1% YoY).
In Q1 '24, we achieved revenue of 170 million yuan (+16.9% YoY), net profit attributable to mother of 0.1 billion yuan (+6.5% YoY), and deducted non-net profit of 0.2 billion yuan (+21.5% YoY). With the deepening of dual transformation and the continuous empowerment of AI, the company's business model and products are expected to be further optimized. Maintain a buy rating.
Key points to support ratings
Increased investment in R&D and fluctuations in the performance of joint ventures led to a decline in net profit to mother. The sharp decline in the company's net profit in '23 is mainly due to: (1) The company increased investment in R&D and marketing network layout. Sales, management, and R&D expenses increased by 17.9%, 25.6%, and 20.0%, respectively, and the corresponding cost ratios increased by 5.9, 3.7, and 4.5 pcts, respectively. (2) The net profit of the joint venture declined due to factors such as finance and customer budgets, and the company calculated an investment loss of 35.708 million yuan.
The “subscription+channel” dual transformation is being further promoted, and domestic and overseas business is driven by two wheels. The company achieved subscription revenue of 220 million yuan in 23 years (+75.6% YoY), ARR of 250 million yuan (+80.6% YoY), related contract liabilities of 160 million yuan (+71.3% YoY), and a product subscription renewal rate of 91.0%.
Looking at the subregions, subscription revenue in the North American and European markets also increased by more than 80.0%. In terms of channel transformation, the company achieved channel revenue of 210 million yuan in 23 years (+22.4% year over year), while channel revenue in the North American, European and Chinese markets increased by 8.6%, 59.5%, and 45.5% respectively.
AI empowers digital office services. The company continues to iteratively optimize the AI functions integrated into the core PDF editor, and gradually realizes AI instructions related to PDF functions through the Smart PDF Commands function. As of Q1 '24, it can achieve more than 100 AI-based instructions. In January '24, the company signed an AI Foxit PDF Editor software agency agreement with core PC channel provider Dell. Empowered by AI, the competitiveness of the company's core products is expected to further improve.
valuations
Net profit attributable to mother is estimated to be -0.02, 0.28, and 49 million yuan in 24-26 (considering fluctuations in the performance of the company's joint ventures, which decreased 64%-104% in 23), EPS is -0.02, 0.31, and 0.53 yuan, corresponding PS is 8.0X, 7.1X, and 6.5X, respectively. With the deepening of dual transformation and the continuous empowerment of AI, the company's business model and products are expected to be further optimized to maintain the buying rating.
The main risks faced by ratings
Subscription transformation falls short of expectations; customer growth falls short of expectations; cost control falls short of expectations.