On August 28, 2023, the company disclosed its semi-annual report. Revenue for the first half of the year was 1.43 billion yuan, down 1.3% year on year; gross margin was 45.3%, down 20.7 pct from the same period last year, and gross profit fell 30.6% year on year. Net profit was $3.14 billion, and loss narrowed by 2.0%; adjusted EBITDA was -2.03 billion yuan, and loss was reduced by 12.8%.
By business, smart business performed the most impressive. Revenue for the first half of the year was 850 million yuan, up 50.2% year on year, mainly due to the high AIDC leasing boom. Currently, the company has launched 30,000 GPUs and has a computing power scale of 6 exaFLOPS; smart city operations are under pressure. Revenue for the first half of the year was 180 million yuan, down 57.7% year on year, mainly due to the company focusing more on first-tier and second-tier cities. Considering the healthy development of accounts receivable and cash flow, the business is expected to continue to shrink in the future; smart living revenue is 3.1 billion yuan, up 6.7% year on year. It mainly benefited from the increase in the contribution of AI sensors NRE; smart car revenue was 80 million yuan, down 30.5% from the previous year. It is mainly due to the expiration of NRE, a major international customer, and the shift to a cooperative method that charges based on shipment volume. The growth rate is expected to pick up in the second half of the year compared to the first half of the year.
In terms of costs and expenses, the decline in gross profit in the first half of the year was mainly due to a sharp increase in hardware costs and separate service fees. The gross margin for the second half of the year is expected to be flat or slightly higher than in the first half of the year. The number of companies in the first half of the year was 5,016, with an average decrease of 16.1%. It is expected that smart cities and other lines will continue to reduce personnel to reduce costs and improve efficiency. As a result, the three fees fell 6.5% year-on-year in the first half of the year (4.9% when considering share payments).
Benefiting from adjustments in the company's business structure, the company's accounts receivable for the first half of the year declined compared to the end of the 22nd, and the net outflow of cash flow from operating activities narrowed. It is expected that the company will step up efforts to reduce costs and improve efficiency to achieve the goal of recovering adjusted net profit and operating cash flow as scheduled.
Referring to the company's semi-annual performance data, we lowered the company's revenue forecast for 2023-2025 to 42.1/53.5/6.70 billion yuan, and lowered the net profit forecast to 35.3/-28.9/-2.65 billion yuan. The corresponding EPS was -0.11/-0.09/-0.08 yuan, respectively, maintaining the “buy” rating.
Risk warning
AI algorithm development progress fell short of expectations; macro-factors and tightening liquidity in the Hong Kong stock market; failure to explore a stable and continuous profit model; reduction in majority shareholders' holdings; international relations risks