With the continuous landing of large model technology and the gradual recovery of the market, cloud technology revenue is expected to gradually usher in a period of rapid growth in the next few years. The company's self-developed general model and industry model will reduce costs and increase efficiency for the company in the coming period of time, and strengthen the comprehensive competitiveness of business landing. Considering that the company is in a period of rapid growth, Yuncong Technology is given 17 times PS in 2024, with a target market capitalization of 19.96 billion yuan, corresponding to a target price of 19 yuan, and a "overweight" rating for the first time.

Company profile: AI four Little Dragons, technological research and development and commercial landing go hand in hand. Yuncong Technology, founded in 2015, is a leader in artificial intelligence incubated in the Chinese Academy of Sciences, and is called the four Little Dragons of AI together with Shang Tang, Kuangshi and Yitu. The company became the first artificial intelligence platform enterprise listed in Science and Technology Innovation Board in 2022. The company started from machine vision, and the founder, Dr. Zhou Xi, led the team to win the championships of world pattern recognition and intelligent recognition competitions, and successfully launched China's first "face recognition payment" and witness-based face verification system. The company builds a man-machine cooperative operating system (CWOS) based on a solid technical foundation, and relies on CWOS to develop artificial intelligence solutions to promote the intelligent transformation of governance, finance, rail transportation, business and pan-AI fields. Since its inception, the company relies on industry solutions to achieve rapid growth, and maintains a high R & D investment to consolidate its competitive advantage. Despite the disruption caused by the short-term government-side business, we believe that the company's rich case accumulation and benchmarking projects are expected to promote the continued recovery of the company's business. The company's pre-IPO financing is purely domestic, which is conducive to undertaking national projects under a safe and controllable background, and the founder Dr. Zhou Xi has more than 59% control of the company, and a stable management structure helps the company to achieve stable and long-term development.

Industry growth: the big model promotes the productivity revolution, and AI empowers all industries. On the demand side, the large model technology led by GPT has been proved to help users greatly improve productivity through OpenAI ChatGPT, Microsoft Corp Copilot, Github Copilot and other applications. On the cost side, the large model has the ability of self-supervised learning, which greatly reduces the cost of data tagging; at the same time, it has a strong migration ability, through the way of "pre-training + downstream task migration". It can be quickly and low-cost migrated and deployed in different business scenarios, which greatly improves the reuse ability.

From the perspective of policy support, in the past few years, major policies and guidance to encourage the artificial intelligence industry have been issued continuously, and this year, the "interim measures for the Management of generative artificial Intelligence Services" has been launched in response to new technological trends such as AIGC/ models, to provide rule guidance for the landing of new technologies. From a spatial point of view, the artificial intelligence industry is growing rapidly. According to Sadie consultants, the size of China's artificial intelligence industry is expected to reach 336.93 billion yuan by 2025, an increase of 63.85% over the same period last year. Although there is some pressure on the downstream market affected by the macro environment in the short term, in the medium term, we expect that the combined development of general large model technology and AIGC technology will promote the productivity revolution and become a new driving force of economic development.

The company's advantages: attach importance to business landing, forward-looking layout of the big model. The company is a domestic AI head enterprise with a relatively leading accumulation of technology, and its AI algorithm has reached the forefront of the world in the test results of several public data sets. The layout of the company's large model is perfect, attaching importance to the application of technology and commercial landing, in the form of foundation + industry model. On May 18, 2023, the company released a large model with a calm foundation, which is close to ChatGPT in the high school entrance examination. According to the fixed increase manual issued in July 2023, the company plans to issue a big model of fixed increase investment in the industry to improve the overall layout. According to the Securities Times, the company released version 1.5 of the leisurely model on August 21, with some indicators surpassing ChatGPT and GPT-4. At the same time, the design concept of CWOS, which the company hit and launched in 2020, is highly similar to the large model AI Agent, which uses a general bottom artificial intelligence system (large model) to support the diversified AI applications in the upper layer. The forward-looking launch of CWOS enables the company to have a general artificial intelligence-related technical architecture and commercial layout, which is conducive to the rapid launch and landing of large models. The company leads the industry in AI algorithm technology, has strong application ability of related technologies, and is exploring C-side scenarios such as AI mouse. We believe that the large model enables artificial intelligence capabilities to be transferred at a low cost in various business scenarios, which is expected to help the company reduce costs and increase efficiency.

Risk factors: AI technology development is not up to expectations; macro-environment recovery progress is not as expected; industry competition is intensified; core technical personnel loss; artificial intelligence technology credibility decline; financing progress is not as expected and other risks.