Under phased pressure in '22, revenue recovered strongly in '23: the company achieved revenue of 1.18 billion yuan in '22, a decrease of 0.78% over the previous year, and the 23Q1 company achieved revenue of 288 million yuan, an increase of 24.8% over the previous year.

Among them, revenue in 2022 was mainly due to overseas business being affected by the turbulent international situation throughout the year and the development of related business, which led to an increase in channel-side sales pressure due to the domestic pandemic. The company's net loss was 362 million yuan in 2022. The main loss was that the online education platform project was affected by the macroeconomic environment and policies. As a result, the current project underwent major changes when the project was set up. The conditions for commercialization are no longer in place, accounting for impairment preparations and fair value changes, and a loss of 195 million yuan. The net profit loss of 2023Q1 was 37.22 million yuan, mainly due to increased channel expenses and marketing expenses for the main literature business.

Gross margin rose, expenses fell during the period, and the company's operating capacity continued to rise: the company's sales expense ratio in 2022 was 39.20%, 2023Q1 was 45.26%. The increase was obvious from month to month. The main reason was that the company's main business, literature promotion and distribution, increased significantly, which had a certain impact on the company's profits. At the same time, the promotion of its own literary works relied on sales leverage. The emergence of phenomenal and popular works can clearly increase the input-output ratio. The company has a huge pool of writers and a relatively complete one, led by 17K Fiction Network Traffic reaches the network, and continuous investment in sales expenses is expected to continuously catalyze the company's performance and contribute to long-term growth momentum. The company's goodwill declined markedly after depreciation processing in 2022. Currently, there is only 220,000 yuan of goodwill left on the account, a decrease of 98.65% over the previous year. After the company's extensive goodwill impairment treatment this time, the company went to power young in 2023. Future goodwill no longer have a significant impact on the company's future fundamentals, which is conducive to the long-term, stable and healthy development of the company's future fundamentals.

Actively embracing AIGC, empowerment in various fields has been implemented one after another: high-quality data elements are a key resource for the development of large AI models. The Chinese online platform generates hundreds of millions of text content every day. If audio and video are added, the high-quality data of Chinese Online has already exceeded 55 TB. At the same time, the company has launched related products in AI painting, AI anchoring, AI-assisted creation, etc.; overseas products, Drawn and MyEscape, are undergoing integration tests with ChatGPT, which is expected to create growth momentum in the future.

Investment suggestions: We expect the company to achieve revenue of 16.4/19.8/2.17 billion yuan in 2023-2025; net profit of 1.6/21/360 million yuan; EPS 0.22/0.30/0.42 yuan. The corresponding PE is 100/73/52 times, respectively. The company's main business is on a continuous upward path. At the same time, the company has a large number of high-quality data elements, which are expected to add bricks and tiles to the big domestic AI model, cover it for the first time, and give it a “buy” rating.

Risk warning: AI development falls short of expectations; commercialization of AI products falls short of expectations; market acceptance of online literature content falls short of expectations; macroeconomic fluctuations affect entertainment consumption demand, etc.