Description of the event

The company released its 2023 annual report. During the reporting period, the company achieved operating income of 2,254 billion yuan, a year-on-year decrease of 0.75%; net profit attributable to shareholders of listed companies was 255 million yuan, an increase of 1.98% over the previous year.

They were all lower than the company's performance forecasts (revenue of 23.85-2,612 billion yuan, net profit attributable to mother of 266-300 million yuan). The company released its quarterly report. 2024Q1 achieved revenue of 540 million yuan, a year-on-year growth rate of 4.51%, and net profit to mother of 20 million yuan, an increase of 216.45% over the previous year.

Core views

Revenue was under pressure in the short term, and profits improved quarterly. The company's quarterly revenue in 2023 was 5.17, 5.40, 6.25, and 572 million yuan, respectively, with year-on-year growth rates of 5.16%, 1.11%, -2.32%, and -5.54%, respectively.

Net profit attributable to mother was -0.18, 0.40, 1.06 million yuan, and 126 million yuan, respectively, with year-on-year growth rates of -225.57%, -26.27%, 25.15%, and 30.11%, respectively. Beginning in the third quarter, the company's profit began to improve year on year. In the fourth quarter, profit reached a record high in a single quarter. The recovery trend was obvious, and profit growth was significantly faster than revenue growth. The company's high-quality development began to bear fruit.

The pan-ERP business is dragging down the overall growth rate. In 2023, the company's pan-ERP business achieved revenue of 1,219 billion yuan, a year-on-year growth rate of -1.70%, and the intelligent manufacturing business achieved revenue of 830 million yuan, a year-on-year growth rate of 2.56%. It was mainly affected by the slowdown in digital investment from some major customers, the slowdown in the pace of acceptance confirmation of some projects, an increase in inventory, and an increase in sales expenses due to increased sales market activity during the reporting period.

Actively expanding new customers, orders in the north and southwest regions are growing at a remarkable rate. The company's annual orders increased 8.7% year over year. Among them, the northern and southwestern markets grew significantly. Orders from the northern region increased 34% year-on-year, and orders from the southwest region increased 171% year-on-year. In terms of industry customer development, customer orders in the new energy sector increased 137% year over year. More than 230 new customers were added throughout the year, accounting for 21.66% of the total number of customers, laying a good foundation for continued market expansion in subsequent years.

Investment advice

Maintain a “buy” rating. The company vigorously carried out high-quality development actions, and the share of management expenses fell from 6% in 2022 to 5.21% in 2023. Starting from 2023H2, profits showed signs of improvement while the revenue side was basically flat. We introduced a profit forecast for 2026. We expect that in 2024-2026, the company's net profit to mother will be 298 million yuan, 375 million yuan, and 4.33 respectively

100 million yuan, year-on-year growth rates were 17.2%, 25.9%, and 15.2%, respectively. The corresponding EPS is 0.73, 0.92, and 1.05 yuan, respectively. Corresponding to the closing price of 17.46 yuan on May 6, PE was 24.01/19.07/16.56 times, respectively.

Risk warning

The development of the industry fell short of expectations, domestic substitution fell short of expectations, and the concentration of customers was high.