Innovative business space can be expected to maintain a “buy” rating
Considering that the company is actively increasing the market expansion and R&D investment of innovative businesses, we have lowered our original profit forecast. The company's net profit for 2023-2025 is 1.80, 2.86, and 383 million yuan (original value was 3.30, 4.10, and 511 million yuan), respectively, and EPS is 0.23, 0.36, and 0.48 yuan/share (original values were 0.41, 0.51, and 0.64 yuan/share), corresponding to the current stock price PE of 121.1, 76.4, and 56.9 times. The company is Huawei's core partner, Independent innovation businesses centered around OpenHarmony and OpenEuler are expected to grow rapidly. The company has mature AI full stack capabilities, can be expected in the long term, and maintains a “buy” rating.
Event: The company released its 2023 three-quarter report. Short-term performance fluctuations In the first three quarters of 2023, the company achieved operating income of 2.162 billion yuan, a year-on-year decrease of 2.37%; realized net profit of 98 million yuan, a year-on-year decrease of 18.95 percent. In the third quarter alone, the company achieved operating income of 726 million yuan, a year-on-year decrease of 0.61%, and realized net profit of 0.18 million yuan, a year-on-year decrease of 45.89%.
Huawei's core partner, bright prospects for growth
At the 5th Huawei Developers Conference on August 4, Yu Chengdong introduced the latest developments in the Open Harmony root community. Among them, “Tianao Smart Drug Cabinet”, enabled by the company's subsidiary Run Kaihong, ranked among them as the representative product of the medical industry pioneered by OpenHarmony, and has already been applied in various hospitals such as Hangzhou and Nanjing. In addition, the company won honors such as “Outstanding Partner of the Year in the Talent Field of Hongmeng Ecological Colleges and Universities” and the “2023 Huawei Developers Alliance Hongmeng Ecological Talent Development Award” at the conference, and was invited to participate in the “Hongmeng Ecological Talent Co-Construction” contract of the Huawei Developer Alliance, fully demonstrating the company's comprehensive strength. It is expected to benefit from the accelerated rise of Huawei's growth opportunities in the future.
The launch of the AI hub platform, AIRUNS, opens a new chapter of growth. The company is progressing actively in the AI field. In early April, it launched a next-generation AI hub platform based on a large model and four closed beta products for industry applications. In May, the “Runhe Software Artificial Intelligence (AI) Strategy White Paper” was released to comprehensively cover the company's development strategy in the field of artificial intelligence, and further release of the public beta version of the AI hub platform, AIRUNS in July, is expected to open up space for the company to grow.
Risk warning: policy implementation falls short of expectations; AI implementation falls short of expectations; company R&D and sales fall short of expectations.