Incident On May 8, 2023, Zhejiang Internet issued an announcement stating that its fixed increase plan was approved by the exchange. The company plans to issue 165 million shares to Bowen, a wholly-owned subsidiary of Zhejiang Cultural Investment, the majority shareholder, to raise 800 million yuan (excluding issuance fees) for AI intelligent marketing system projects (207 million), live streaming and short video smart marketing ecosystem platform projects (301 million), repayment of bank loans and supplementary working capital (200 million). After the issuance is completed, Zhejiang Cultural Investment's shareholding ratio in listed companies will increase to 16.47%.
Dingzang received approval and continued empowerment, accelerating the transformation and upgrading of fund-raising projects. On the one hand, it forward-looking laid out AI intelligent marketing systems, accumulated digital assets on the card marketing side, and completed the construction of an entire industry chain that enabled AI to store self-stored data, self-developed algorithms, and self-created tools to help reduce costs and increase efficiency in all aspects. In 2022, the company's suppliers benefited from AI's ability to empower marketing. Investment in video and design outsourcing was reduced by 28.37%. On the other hand, the fundraising project builds an intelligent marketing ecosystem platform for live streaming and short video. Using cutting-edge technical means such as AI, the platform will greatly enhance the company's competitiveness in live streaming marketing and short video content creativity, production, operation, user reach, etc., and promote the implementation and upgrading of intelligent product selection, virtual live streaming, process management, and supply chain management.
AI empowers the upgrading of digital culture, pioneering the second growth curve. The company led the development of AIGC tool applications and launched applications such as rice painting and digital warrior to improve digital marketing content production efficiency. The company's sub-brand Zhejiang Mita focuses on digital art creation in the metaverse and has attracted 470,000 registered users. In addition, the company cooperates with domestic AI model manufacturers to connect well-known domestic big models such as Wen Xin's words. Meanwhile, Zhejiang Internet is the official online brand promotion service provider for the 2022 Asian Games and Asian Paralympic Games in Hangzhou. It uses cutting-edge technology in the metaverse to provide comprehensive support for the Asian Games.
The investment proposal is based on macroeconomic recovery. We believe that the company's main marketing business will gradually recover and consolidate the basic market in '23, combined with AI to continuously empower, reduce costs and increase efficiency. Currently, many indicators such as the company's net profit and gross profit have improved in 23Q1. Without considering the impact of this fixed increase on share capital, we expect the company's net profit to be 300/347/410 million yuan respectively in 23-25, the corresponding EPS will be 0.23/0.26/0.31 respectively, and the corresponding PE will be 33x/29x/24x respectively, giving a “recommended” rating.
Risks indicate the risk of concentrated media traffic suppliers, the risk of tax policy risks, the risk of new business falling short of expectations, the risk of increased market competition, and the risk of macroeconomic fluctuations.