Incident: Zhongwang Software released its 2023 annual report and 2024 quarterly report: 1) Achieved revenue of 828 million yuan for the full year of 23, an increase of 37.71% over the previous year, and net profit of 61 million yuan to mother. 2) 24Q1 achieved revenue of 120 million yuan, an increase of 3.84% over the previous year, and net profit to mother was a loss of 26 million yuan.
The revenue side recovered in '23 compared to '22, and fell short of expectations in 24Q1. Zhongwang's revenue in '23 increased significantly compared to '22. Part of the reason was the merger brought about by the strategic acquisition of Bochao. After deducting some of these factors, it was still able to recover from the decline in revenue in '22. However, 24Q1's revenue performance fell short of expectations. According to information disclosed in the company's quarterly report, the main factor was that the education business was affected by the progress of customer fund disbursements.
The domestic commercial market has performed well, and the overseas market continues to expand. In 23, the company's leading products, 2D CAD and 3D CAD, achieved revenue of 303 million yuan and 134 million yuan respectively in the enterprise sector, an increase of 33.48% and 28.35% over the previous year, with core products leading the growth of the business. By region, revenue from overseas markets reached 157 million yuan in 23 years, an increase of 71.14% over the previous year, accounting for about 19% of total revenue. Overseas market revenue continued to grow by nearly 50% year-on-year in the first quarter, and the company's overseas product penetration and market expansion are accelerating.
Investment in R&D and marketing continues to be high. During the reporting period, the company continued to polish and iterate products around 3D CAD, BIM, CAE, etc., to create an “all-in-one CAx integration” solution.
R&D investment reached 404 million yuan in '23, an increase of 27.58% over the previous year. Meanwhile, the marketing side continues to implement the business strategy of “sinking small and medium-sized enterprises” and “focusing on big customers” to broaden the channel network. Annual sales expenses amounted to 435 million yuan, an increase of 26.34% over the previous year. We judge that the company will maintain investment in R&D and marketing during the current growth stage, the company's overall rate will still be high, and it may still take time to release the profit side.
Investment advice: We expect the company's 24-26 revenue to be 977, 11.74, and 1,435 million yuan, respectively, and corresponding net profit of 0.65, 1.07, and 178 million yuan. We are optimistic about the company's broad space for development and the company's global layout under the domestic production process, and maintain a “buy” rating.
Risk warning: downstream demand falls short of expectations; breakthroughs from major customers fall short of expectations; market competition intensifies.