The company released its 2023 annual report and 24Q1 quarterly report. In 2023, the company achieved operating income of 2,441 billion yuan, a year-on-year decrease of 13.56%; net profit to mother was 195 million yuan, a year-on-year decrease of 66.00%; and deducted non-net profit of 78.82 million yuan, a year-on-year decrease of 80.40%. 24Q1 achieved revenue of 294 million yuan, a year-on-year decrease of 14.92%, net profit to mother - 52.64 million yuan, and deducted non-net profit to mother - 78.76 million yuan.

Procurement business: increase R&D to promote product iteration and continuously improve core competitiveness. In 2023, the company's procurement business operations were under pressure, achieving annual revenue of 1,022 billion yuan, a year-on-year decrease of 16.38%. Facing operational challenges, the company continues to promote the digitization process of bidding and procurement through product iteration, improving quality and efficiency, increasing investment in operating product research and development, innovating services for market players, and continuously improving its core competitiveness. In terms of government-side public resource transactions, the company added nearly 400 new public resource trading related projects during the reporting period. By the end of 2023, the company had built a total of 29 public resource trading platform projects covering 29 provinces (autonomous regions and municipalities directly under the Central Government), serving more than 200 cities, more than 1,000 counties and cities; in terms of enterprise side bidding and procurement, the company added benchmark cases such as China Ships, China Building Materials, China Chemical, Anhui Energy, Capital Steel, and Liaoning Tobacco during the reporting period, undertaking more than 60 electronic bidding and procurement platforms for large state-owned enterprises and state-owned enterprises.

In the recruitment business, the company focuses on strengthening the development of the recruitment and operation business. On the tenderer service side, the company actively promoted the marketization of transactions. The SaaS platform “Xindian Electronic Trading Platform” created by the company added 85 sections, and the number of trading segments on the platform increased by 41% year on year; on the bidder server, the company further improved and promoted “Biaqiao” and “Biaozhengtong” products. The number of newly registered users increased by 41% over the same period last year, and Biaoqiao has also been sold in more than 10 provinces. At the same time, based on technologies such as big models, industry knowledge maps, and big data analysis, the company develops large-scale recruitment industry models, empowers bidders' high-frequency business scenarios such as tender document preparation and intelligent automatic pricing, and further enhances the core competitiveness of the product.

Smart government business: Strengthen key technical capacity building and carry out exploration related to data element operation. In 2023, the company's smart government business revenue was 1,055 billion yuan, a year-on-year decrease of 14.49%. During the reporting period, the company continued to increase intelligent R&D and data service transformation of one-network access, one-network management, and one-network collaborative products, and also carried out related exploration of data element operations. In 2023, we will undertake more than 1,400 projects, covering 31 provinces, municipalities and autonomous regions. On the basis of speeding up the iteration of one-network access, one-network management, and one-network collaborative product development, the company is strengthening investment in key technical capabilities such as metaverse, artificial intelligence, big data, and PaaS to ensure that key technologies support and drive business development. In terms of data elements, the company has seized market opportunities such as data asset registration and launched comprehensive application solutions for public data scenario operation and grass-roots data, and has achieved project implementation and application. At the same time, the company is strengthening the efficiency of smart government services, promoting a new model of modular design and development, and improving the overall efficiency of the top 5 workload scenarios of various specialized teams by about 40%.

Digital construction business: expand the construction of CIM platforms and explore the commercial operation of data. During the reporting period, the company's digital construction business achieved revenue of 358 million yuan, a year-on-year decrease of 2.63%. During the reporting period, the company continued to promote technological upgrading and promotion of integrated digital housing and construction platforms, released a comprehensive housing safety management platform and V3.0 engineering digital supervision platform, and undertook the Jiangsu Housing Safety Digital Supervision Platform Project and the Yantai Smart Construction Site Supervision Platform Project respectively. While continuously upgrading iterative cost products, the company continues to improve and upgrade new cost cloud products, realizes data exchange with cost software, and comprehensively diversifies data services. Among them, the ability to integrate data service algorithms into big data models has been comprehensively improved, and it has gradually begun to implement commercial data operations.

Investment advice: Considering that the overall economic recovery in recent years was weaker than expected, and the pace of progress in many of the company's businesses was affected, we adjusted the company's revenue and profit forecasts. We predicted that the company's revenue for 2024-2026 would be 23.08/24.84/2,759 billion yuan, respectively (the forecast value before 2024-2025 would be 31.67 billion yuan), and net profit to the mother would be 1.85/2.28/309 million yuan, respectively (the forecast value before 2024-2025 was 589/773 million yuan, respectively), corresponding PE was 40/33/24 times, respectively. In the short term, the company was affected by factors such as slowing revenue growth and cost rigidity, and profits temporarily turned into losses during the reporting period, but we believe this did not affect the company's leading position and core competitiveness in the ToB business field, and we see that demand for digital transformation and upgrading on the government side is still there. In the future, as the macro environment recovers and corresponding spending on the government side and the enterprise side recovers, the company is expected to further stabilize and expand its market share. Therefore, we maintain a “buy” rating.

Risk warning: risk of economic uncertainty; risk of uncertain government IT investment budget; risk of increased industry competition

etc.