Core views

In 2023, the company achieved operating income of 611 million yuan, an increase of 5.33% over the previous year; net profit to mother - 90.94 million yuan, after deducting non-net profit - 179 million yuan. 24Q1 revenue was 169 million yuan, up 16.87% year on year; net profit due to mother - 10.609 million yuan, a year-on-year decrease of 6.47%; deducted non-net profit - 206.562 million yuan, a year-on-year narrowing of 21.5%. The company is steadily advancing the dual transformation strategy. Revenue growth is expected to accelerate, and profits may be greatly improved. Based on the company's results for the first quarter of 2023 and 2024, we adjusted the 2024-2025 profit forecast and added the 2026 forecast. The estimated revenue is 6.60/759/882 million yuan, up 8.13%/15.00%/14.82% year on year, and net profit to mother is -0.29/0.33/ 0.80 billion yuan, up 68.33%/213.11%/145.73% year over year, corresponding to PE -186/164/67 times, maintaining the “buy” rating.

occurrences

The company publishes the 2023 Annual Report and the 2024 Quarterly Report. In 2023, we achieved operating income of 611 million yuan, an increase of 5.33% over the previous year; net profit attributable to mother - RMB 90.94 million, compared to -1.74 million yuan in '22; net profit after deducting non-net profit of RMB 179 million, or -78 million yuan in '22. 24Q1 revenue was 169 million yuan, up 16.87% year on year. Net profit to mother was 10.609 million yuan, a decrease of 6.47% year on year; after deducting non-net profit of 206.562 million yuan, a year-on-year narrowing of 21.5%.

Brief review

Dual transformation progressed smoothly, and subscription+channel revenue grew. The company steadily promoted the dual transformation and growth strategy of subscription priority and channel priority. In 24Q1, it achieved subscription revenue of 74.3785 million yuan, an increase of 73.30% over the previous year; the amount of ARR for the subscription business was 281 million yuan, an increase of about 13.09% over the end of the previous year. The company's channel revenue was 63.1871 million yuan, a year-on-year increase of 49.01%. In 24Q1, the company's subscription and channel revenue accounted for 44.07%/37.44% respectively, achieving a double increase.

Revenue growth in the European and American markets accelerated in 24Q1, and the results of the dual transformation gradually became apparent. The company's revenue in mainland China/North America/Europe accounted for 10.6%/56.5%/23.6% in 2023, and revenue increased 14.6%/0.3%/19.5% year-on-year. Revenue growth in Europe and the US accelerated in 24Q1. North America/European revenue increased 11.0%/26.0% year-on-year, mainly showing the results of both transformations. By business, in 2023, the company successfully promoted subscription transformation in the European and American markets, achieving a year-on-year increase of more than 80% in subscription revenue in both markets. In 2023, channel revenue in the European market increased 59.53% year over year, and channel revenue in the North American market increased 8.55% year over year. If revenue from core PC channel providers is excluded, the growth rate reached 19.75%.

AI functions are continuously iterated, and commercialization results can be expected in the future. The company fully embraces AI, accelerates the refinement of the entire product line, and attracts more users; it continues to technically iterate the AI functions on the PDF editor, and the product experience continues to improve. The company is also gradually AI related to PDF function instructions through the Smart PDF Commands function, and can now implement more than 100 AI-based instructions. In 2024, the company will use a basic model with multi-modal capabilities to interpret PDF documents to ensure the accuracy of document content extraction; promote generative AI applications, and create customer-centered AI-driven intelligent document applications.

Investment advice: The company's dual transformation strategy is progressing smoothly, and revenue growth is expected to accelerate. The company fully embraces AI and continues to iterate AI functions on the PDF editor to achieve AI transformation of PDF function instructions, and commercialization results can be expected in the future. Based on the company's results for the first quarter of 2023 and 2024, we adjusted the 2024-2025 profit forecast and added the 2026 forecast. The estimated revenue is 6.60/759/882 million yuan, up 8.13%/15.00%/14.82% year on year, and net profit to mother is -0.29/0.33/ 80 billion yuan, up 68.33%/213.11%/145.73% year over year, corresponding to PE -186/164/67 times, maintaining the “buy” rating.

Risk analysis

(1) Dual transformation falls short of expectations: the company actively and steadily promotes a dual transformation and growth strategy with subscription priority and channel priority. If the development of the relevant strategy falls short of expectations, it may adversely affect the company's performance; (2) Generative AI application promotion falls short of expectations: the company fully embraces AI and gradually realizes the AIization of relevant PDF functional instructions through the Smart PDF Commands function. If related products fall short of expectations, or the products launched do not meet user needs, it may affect the company's competitiveness, which in turn affects the company's performance; (3) the market Competitive risk: In the international market, major overseas competitors are still in a competitive position, and they are also competing with companies in the domestic market. Large software vendors related to international PDFs have advantages such as early start, large scale, and sufficient capital, which may cause companies to face the risk of market competition; (4) Risk of impairment of goodwill: Company acquisitions have formed a large reputation. In 2023, AccountSight accrued goodwill impairment losses of $48.8359 million due to failure to meet performance targets. As of December 31, 2023, the net book value of goodwill was $150.7733 million, accounting for 5.00% of total assets. In addition, the company recently received an inquiry letter from the exchange due to its intention to use overraised capital to acquire Fuxin Kunpeng's shares. The inquiry letter proposed a loss in the subject matter of the acquisition and no performance promise. The company added performance promises and compensation rules to the inquiry letter to reduce the risk of future impairment of goodwill. Overall, this acquisition and previous acquisitions have brought more goodwill. If the operating conditions of the asset group corresponding to the goodwill fall short of expectations in the future, there may be a risk of impairment of goodwill, which will adversely affect the company's current profit and loss.