The company released its 2023 annual report. The company's total revenue for 2023 was 3.95 billion/+15.6%, and the annual GAAP net profit was 10.11 million yuan. The company's payment base is steady, and the in-store e-commerce business continues to grow. The company is expected to seize development opportunities in the store industry by accumulating resources on the merchant side, strong BD capabilities, and extensive user reach, explosive mentality, and efficient delivery. Maintain a “Highly Recommended” rating.

GPV payments continued to grow, and in-store losses improved. In 2023, the company's total revenue was 3.95 billion/+15.6%, and gross margin was 18.7%. Due to the impact of one-time payments in the payment business, gross margin decreased by 11.5 pct compared to the same period last year; GAAP net profit for the whole year was 10.113 million, and net profit declined compared to the same period last year, mainly due to 23 years of losses in the e-commerce business and one-time payments from the payment business. By business, one-stop payment revenue in 2023 was 3.49 billion yuan/ +26.5%, and the company's one-stop payment GPV reached 2.9 trillion yuan/ +29.2% in 2023. The company's payment business mainly consists of small and medium-sized merchants. With the recovery of offline customer flow, the payment growth rate rebounded rapidly and achieved impressive growth rates. In 2023, in-store e-commerce business revenue was 100 million/ -71.0%, and losses narrowed to 40 million. In 2023, the company tried an asset-light model with a service provider license to effectively reduce losses and maintain the continued growth of GMV. The company's GMV of in-store e-commerce business revenue reached 4.30 billion/+30.3% in 2023. The company's SaaS business revenue reached 360 million/ +17.2%. As offline activities resumed one after another, the willingness of merchants to pay for SaaS increased, the number of active merchants reached 160 million/ +30.8%, and ARPU remained at around 200 yuan+.

Revenue growth is expected to continue at a high rate in 2024, and in-store losses will continue to improve. We expect the company's total revenue to be about 4.83 billion/+22.3% in 2024, and the gross margin will increase by about 7.0 pct to about 25.2%. The overall adjusted net profit of the company is estimated to be about 40 billion in 2024. By business, payment revenue is estimated to be about 4.26 billion/+22.1%, merchant solution revenue is about 430 million/ +18.3%, in-store e-commerce revenue is about 140 million/ +40.7%, and in-store e-commerce GMV is expected to reach about 5.16 billion/+20.0%. It is expected that in-store e-commerce business losses will improve further in 2024.

Investment advice: The company's payment base is steady, and the in-store e-commerce business continues to grow. With the accumulation of merchant resources and strong BD capabilities, and extensive user reach, explosive mentality, and efficient investment, the company is expected to seize opportunities for store development. We expect the company's adjusted net profit for 2024-2026 to be $40/47/53 billion, respectively. Maintain a “Highly Recommended” rating.

Risk warning: Competition in the industry intensifies, and in-store business development falls short of expectations.