The company's 2023 results are in line with market expectations
The company announced its 2023 results: operating income of 1,819 million yuan, -25.98% year on year; loss of 374 million yuan, -241.51% year on year; loss after deduction of 454 million yuan, -304.41% year on year. Looking at a single quarter, 4Q23 achieved revenue of 232 million yuan, -78.18% YoY; loss of 334 million yuan, or -283.99% YoY. The results are in line with market expectations.
Development trends
Multiple factors disrupt the project process, and cost expansion suppresses performance. 1) In 2023, the pace of release of the company's downstream demand slowed down. Due to the suspension of special bidding qualifications, the bidding process for some projects was delayed, and the amount of new orders was reduced throughout the year; at the same time, due to delays in acceptance of some projects, the company's revenue declined year-on-year. 2) The company's expense ratio for the 2023 period was +22.00ppt to 56.13% year on year. We believe that this year's cost-side increase was mainly due to the increase in the company's expansion investment and interest expenses on debt conversion. Among them, the company's sales/management/R&D expenses ratio was +4.84/4.45/9.00ppt to 14.49%/15.26%/21.03% year on year, respectively, and the cost ratio increased significantly to suppress performance.
Repayments have improved throughout the year, and the space-space integrated data resource system has progressed steadily. 1) The company's net cash outflow from operating activities for the year was 870 million yuan, mainly due to a significant increase in employee remuneration payments and procurement payments. Cash inflows from operating activities for the full year of '23 increased 6.09% year-on-year to $1,935 billion. Against the backdrop of pressure from the external macroeconomic environment, annual repayments improved. 2) The company is steadily advancing the layout of an integrated space-space data resource system, and has now formed a data source system that complements satellite and drone data. The company plans to launch at least 12 commercial radar satellites in 2024 and continue to promote drone production. We believe that the construction of an autonomous data source system is expected to achieve organic linkage between upstream data sources and remote sensing applications, and open up a new growth curve for cloud services and data services.
Data elements and overseas markets drive incremental business, and AI empowers to help reduce costs and increase efficiency. 1) The company's data products are listed in several stores, and the PIE+ industry business is gradually connected to autonomous aerospace/aviation data sources, and efforts are being made to build an industry-level integrated service platform system and data products. We believe that data operation and data empowerment are expected to become the new core driving force for the company's business growth. 2) The company's first overseas order landed in Bolivia and implemented projects in Thailand, Australia and other countries. We believe that with the improvement of overseas strategic layout and the accumulation of experience in international projects, the company's overseas market is expected to expand rapidly. 3) Actively explore the application of big models, AIGC, GPT and other technologies in remote sensing data processing and interpretation, and release the “Tianquan” visual big model. We believe that AI applications can drive the company's product upgrades and help reduce costs and increase efficiency.
Profit forecasting and valuation
Considering the pace of downstream demand release, we lowered the company's 2024 net profit forecast by 52.7% to 240 million yuan, and introduced 2025e net profit of 371 million yuan. The company's current stock price corresponds to 24.1/15.5 times the price-earnings ratio in 2024/2025. We maintained our outperforming industry rating and lowered our target price by 53% to 27.54 yuan, corresponding to the 2024/2025 price-earnings ratio of 30.0/19.4 times, with a potential increase of 25%.
risks
Market expansion falls short of expectations; cash flow improvement falls short of expectations; macroeconomic policies and environmental risks.