Domestic IT products, technical solutions and service providers maintain “buy” ratings
We maintain the company's net profit forecast for 2024-2026 at 1,403, 16.99, and 2,135 billion yuan, EPS of 2.09, 2.54, and 3.19 yuan/share, respectively. The current stock price corresponds to PE 14.4, 11.9, and 9.5 times, respectively. Considering the company's leading layout in the “Kunpeng + Shengteng” ecosystem, we maintain a “buy” rating.
Overall performance is in line with expectations, and profitability has improved
(1) The company released its 2024 quarterly report. Q1 revenue reached 29.272 billion yuan, up 7.95% year on year; net profit to mother reached 235 million yuan, up 12.35% year on year. (2) The company's profitability increased, with gross sales margin of 4.57%, an increase of 0.89 percentage points over the previous year. The sales expense ratio, management expense ratio, and R&D expense ratio were 1.54%, 0.28%, and 0.30%, respectively. The year-on-year change was -0.01, 0.02, and 0.04 percentage points. The financial expenses ratio was 0.76%, up 0.61 percentage points from the previous year, mainly due to the cessation of capitalization of financial expenses after the completion of the Shenzhen Bay headquarters base; on the other hand, changes in foreign currency business exchange profits and losses due to the depreciation of the RMB. In addition, the Q1 asset impairment loss was 148 million yuan. The large year-on-year increase was mainly due to an increase in inventory price reduction accruals.
The strategic business continued to achieve key breakthroughs. According to the company's public account, Xinchuang's business increased by 166%. According to the company's public account, the company's two major strategic businesses, cloud, and digital, and independent brands surpassed double digits for the first time. Specifically, the revenue of the independent brand business reached 1.25 billion yuan, of which the Xinchuang business achieved revenue of 1,138 billion yuan, a sharp increase of 166% over the previous year. In particular, the revenue scale of Shenzhou Kuntai AI computing power-related businesses in a single quarter was close to the full year of 2023. Cloud and digital business revenue reached 1.68 billion yuan, of which high-value digital cloud business (MSP+ISV) achieved revenue of 366 million yuan, an increase of 127% over the previous year.
Actively explore the internationalization and automobile markets, create a new growth curve. In 2024, the company officially announced “going overseas”, the international business headquarters settled in the Greater Bay Area of Shenzhen, and signed a Memorandum of Understanding (MOU) on cooperation with Thailand's Ministry of Digital Economy and Social Affairs, opening a new chapter of international layout. At the same time, focusing on breakthroughs in the automotive industry, the company set up an automotive industry team to join hands with its company Hi-Tech Shuju and Shenzhen Data Exchange to first test the best practices for asset registration; launch a full-link operation service for the first comprehensive NEV live broadcast base in China to create a differentiated competitive advantage with data as the core.
Risk warning: Market competition increases risk; supply chain risk; accounts receivable management risk.