Q3 maintains rapid growth in revenue and profit in a single quarter.

In the first three quarters of 2023, the company achieved an operating income of 436 million yuan, an increase of 24.37% over the same period last year, and a net profit of 116 million yuan, an increase of 29.41% over the same period last year. Q3 achieved an operating income of 131 million yuan in a single quarter, an increase of 26.15% over the same period last year, and a net profit of 28 million yuan, an increase of 41.26% over the same period last year.

In terms of cash flow, the net cash flow generated by the company's operating activities in the first three quarters was 92 million yuan, an increase of 206.43% over the same period last year, mainly due to the increase in cash received from the sale of goods and services. In terms of expenses, the rates of sales, management and R & D expenses in the first three quarters of the company were 11.46%, 9.85% and 7.33% respectively, with year-on-year changes of-0.97pct, + 2.16pct and-1.56pct respectively. The increase in management expenses was mainly due to the amortization of employee stock ownership plan expenses in 2023.

On October 21, the company held a "AI+" strategy and new product conference in Tianjin, at which the "AI+" strategy of "one positioning, two persistence and three measures" was formally put forward, and the release of Lingu education model and AI series products was completed at the same time. The "Lingu Education Model" is a product built by the company based on the core application scenarios of the education industry. at present, it has completed the second pre-training of 10 billion-level Token training data, and fine-tuned the instruction data special scene of 10 billion-level Token, which has stronger adaptability, higher accuracy and better performance than the general model in the education scene. The company comprehensively upgraded its own product matrix and released "AI solution for Science and Chemical experiment", "AI solution for physical Education" and "AI solution for English computer Test" at the meeting.

Among them, the "English computer test AI solution" is based on speech recognition and natural language processing capabilities, breaking the shackles of traditional examinations and achieving the goal of "one test paper to make the examination more fair and efficient" through intelligent mobile terminals. Through the curriculum standard cognition and guidance ability of teacher Xiaoling, AI English learning assistant, we can help students realize personalized learning and tutoring, and easily complete the effective mastery of curriculum standard knowledge points, word grammar and assessment goals, so as to make learning more interesting, accurate and efficient. Through the application of three intelligent digital terminals, four ability systems and five AI technology, the organization and implementation of the English listening and speaking test before, during and after the test is more refined and intelligent. at the same time, it helps the implementation of the paperless test of the whole subject, and realizes the high unity of the answer form of the paperless test and the traditional paper-and-pencil test.

The cooperation between the company and Tencent in the field of education has upgraded again.

On September 7-8, 2023, Tencent held the 2023 Tencent Global Digital Ecology Conference with the theme of "accelerating intellectual change and renovating Industry" at Shenzhen International Convention and Exhibition Center. Jiafa Education, as an important partner of Tencent in the education field, was invited to attend the conference. Zhang Yue, the general manager of the company, led a team to attend a special event on intelligent education and delivered a keynote speech on "jointly building AI+ educational ecology and promoting the high-quality development of education". At the event, Jiafa Education won the Tencent Education Best Product Joint Research partner Award, and attended the launch ceremony of Tencent Education partner Star Map Project, and formally signed a basic education product cooperation agreement with Tencent Cloud. The establishment of closer relations between the two sides in the field of education marks a new stage of cooperation.

Profit forecast and investment advice

The company focuses on the two major business directions of wisdom examination and wisdom education, and actively explores the integration of AI and the new generation of English listening, speaking, intelligent sports and other solutions to help AI+ education industrialization land, and the performance is expected to usher in an inflection point. It is estimated that the EPS of the company from 2023 to 2025 is 0.36,0.47,0.60 yuan respectively, and the corresponding PE of the current stock price is 43.95,33.73,26.24 times respectively, maintaining the "buy" rating.

Risk hint

The landing of the policy is not as expected, the industry competition is intensified, and the promotion of new products is not as expected.