Incidents:
The company released the “2023 Annual Report” after closing on April 25, 2024.
Comment:
Revenue achieved rapid growth. Standardized products performed well in 2023. Affected by the macroeconomic downturn, the overall software procurement budget growth rate of domestic enterprise customers showed a downward trend. The second half of the year was more obvious than in the first half of the year. The company achieved annual revenue of 827.593 million yuan, an increase of 37.71% year on year; achieved net profit of 61.4064 million yuan, an increase of 922.84% year on year. By product, 2D CAD products achieved revenue of 471.7581 million yuan, of which ZWCAD revenue increased 33.48% year on year; 3D CAD products achieved revenue of 187.6552 million yuan, up 16.28% year on year, of which ZW3D revenue increased 28.35% year on year; CAE products achieved revenue of 7.1487 million yuan, up 209.67% year on year; and Bochao series products achieved revenue of 32.648 million yuan.
Domestic and overseas markets continue to expand their layout and strengthen industry plans and channels to build domestic commercial business. For SME customers in the general industry, the company is committed to taking advantage of significant improvements in product quality and pre-sales and after-sales service efficiency. Relying on constant pressure on KA customers, the company began to gradually refine and form industry solutions in typical application scenarios, such as digital solutions for the transportation infrastructure industry created in collaboration with Poly Growth, a “domestic CAD platform+pan-natural resource application” solution co-built with Nanjing National Map, and a national hardware mold design solution for the mold industry created with Xinshuo Technology. In terms of overseas business, the company set up new local offices in many countries in Asia and Europe, continued to expand the overseas localization business team, and continued to strengthen the global channel distribution network. The annual overseas business revenue increased 71.14% year over year.
Continued to increase investment in R&D. Through mergers and acquisitions, the company invested 403.7877 million yuan in R&D in 2023, an increase of 27.58% over the previous year. In terms of 3D CAD, the company has enriched ZW3D's industry-specific design toolset and enhanced the processing capabilities of CAM components. With breakthroughs in key technology points, ZW3D's product competitiveness in the fields of general machinery, high-tech electronics, mold design, home appliances, etc., has gradually expanded into high-end manufacturing industries such as automobiles, auto parts, and ships. On the CAE side, it relied on upgrades in the field of product calculation accuracy and efficiency to expand application support for CAE series products in customer design scenarios such as machinery, automobiles, electronics, and motors; it wholly acquired CHAM, an established British commercial fluid simulation software developer, and obtained all the source code and core technology of its fluid simulation software PHOENICS.
Profit forecasting and investment advice
As a domestic R&D and design industrial software market leader, the company relies on excellent product performance, high-quality and efficient localization services, and leading ecosystem construction to continuously meet the differentiated needs of downstream, and has broad room for continuous growth in the future. The company's revenue for 2024-2026 is estimated to be 10.12, 12.09, and 1,422 billion yuan, net profit due to mother of 0.80, 1.03, and 129 million yuan, EPS of 0.66, 0.85, 1.06 yuan/share, and the corresponding PE is 118.56, 92.23, and 73.63 times. Maintaining a “buy” rating considering the industry's room for growth and the continued growth of the company's business.
Risk warning
Technology research and development risks; core technology leakage risks; brain drain risks; business development risks; exchange rate fluctuation risks; income tax preferential policy changes; risks of increased market competition; macroeconomic downside risks; trade frictions and geopolitical risks.