Increased investment in R&D and management expenses led to a decline in profits
The company announced that in 2021, the company's revenue was 1,613 billion yuan, an increase of 3.74% over the previous year, and the net profit of the mother returned to the mother was 54.09 million yuan, a decrease of 47.98% over the previous year, after deducting the net profit of the non-return mother of 44.75 million yuan, a decrease of 54.81% over the previous year. In 21Q4, the company's revenue was 504 million yuan, a year-on-year decrease of 11.63%, a year-on-year decrease of 14.06 million yuan, a year-on-year decrease of 58.34%, and net profit of non-return mothers of 8.39 million yuan, a year-on-year decrease of 73.60% (we previously anticipated revenue of 2,479 million yuan in '21 and net profit of Guimo 251 million yuan). The reason for the decline in the company's net profit was a large increase in R&D expenses and management expenses. In 2021, R&D expenses were 183 million yuan, an increase of 27.08% over the previous year, and management expenses were 135 million yuan, an increase of 29.77% over the previous year. We expect that the company's EPS for 2022-2024 will be 0.45/0.57/0.79 yuan respectively. Referring to the comparable company's 2022 average of 38.5 xPE (wind), 22E will be given 38.5xPE, with a target price of 17.38 yuan (previous value of 24.00 yuan), “bought”.
The 2B field of AI products is growing rapidly
In 2021, the intelligent interactive pen business (including digital painting, capacitive pens, and paperless signing) generated revenue of 1,098 million yuan, a decrease of 1.22% over the previous year, mainly due to the year-on-year decline in overseas painting business; the gross profit margin was 52.79%, down 5.92 percentage points from the previous year. Revenue from text big data and services (including smart justice, smart files, smart humanities, smart teaching English, and smart finance) was $246 million, up 29.07% year on year, gross margin was 39.72%, down 1.84 percentage points year on year. As can be seen, the company's expansion in the 2B field of AI is relatively smooth. Revenue from AI terminals (including handwritten electronic paper, bionic flying aircraft, etc.) was 162 million yuan, an increase of 6.21% over the previous year, and gross margin was 38.45%, an increase of 2.09 percentage points over the previous year.
AI commercialization capabilities are gradually improving
Han Wang has always been outstanding in terms of AI commercialization capabilities. From early e-books to current digital painting products, new AI products have been continuously launched. 1) AI 2C field. In February 2021, the company held the first global online press conference for professional-grade digital painting products in the US and officially launched the “Xencelabs” professional brand, forming a matrix of “UGEE Youji”, “XP-PEN”, and “Xencelabs” positioning different series of products. 2) AI 2B field. In the judicial field, the company launched an AI file graphic analysis and recognition cloud platform; in the field of archives, the company launched a file recognition and analysis system; in the field of education, the company's products include smart reading system platforms, digital classroom solutions for art education, test question management systems, etc.; in the financial sector, the company launched dual-record intelligent risk control robot products.
The product matrix is gradually broadened, and the “buy” rating
We believe that Han Wang's AI commercialization capabilities are expected to be gradually improved, and the product matrix is expected to be gradually broadened. In 2022, it is recommended to focus on iterating and commercializing new products. Considering that the impact of the epidemic exceeded expectations, revenue forecasts were lowered, investment in R&D management increased, and the cost rate was raised assumptions. We expect revenue for 2022-2024 to be 2,011/24.90/3,071 billion yuan (previous value: 34.79/4253/100 million yuan), and net profit of 1.10/138/193 million yuan (previous value: 348/417/100 million yuan).
Risk warning: downstream demand fell short of expectations; the increase in AI commercialization capabilities fell short of expectations.