Incident Overview
1) On January 30, the company released the “2023 Annual Performance Forecast”. In 2023, net profit attributable to mother is expected to achieve profit of 75-10,000 yuan, up 81.80%-142.39% year on year; net profit after deducting non-return to mother is 7800-105 million yuan, up 636.06%-890.86% year on year.
2) On January 30, the “Xiangyue AI Is Promising - Multimedia Big Model Innovation Application Summit Forum and Launch Signing Ceremony” was held in Malanshan, Changsha. At the ceremony, China's first multimedia creative pendulum model Wanxing's “Tianmu” was officially released.
3) On February 3, Wanxing Technology issued the “Notice on Changing the Use of Some Funds Raised, Adding Implementing Entities, and Adjusting the Internal Investment Structure of Fund-raising Projects”. The company plans to raise 24 million yuan in part of the “Digital Creative Resources Mall Construction Project” and use it to “pay the remaining consideration for the 72.44% equity acquisition project of Hangzhou Gexiang Technology Co., Ltd.”
Net profit achieved a high increase in 2023. Continuing with the new AIGC function service in 2023, the company expects the main business revenue to grow rapidly year-on-year, and net profit after deducting non-recurring profit and loss, increasing 636.06%-890.86% year-on-year. On the one hand, the company continues to polish star products. On the other hand, it has launched various AIGC functions such as quick text content understanding and summary, graphic image generation, intelligent music generation, and intelligent text composition on products such as Wanxing Meowing/Filmora, Wanxing PDF/PDFelement, EdrawMind, etc., and launched a new series of AIGC creative services on the multimedia cloud toolset product Media.io; on the other hand, it launched new AI creative products such as Wanxing Broadcom and Kwicut Deepen to meet the needs of cross-border marketing, creative entertainment and other scenarios, and promote the effective expansion of the user base and continuous improvement of user value.
“Tianmu”, the first large-scale multimedia creation model in China, was officially released. According to the official WeChat account, Wanxing's “Tianmu” focuses on digital creative production scenarios, based on 1.5 billion creators and 10 billion localized high-quality audio and video data precipitation, based on audio and video generative AI technology, and has the three characteristics of “multimedia”, “vertical solutions”, and “localized data”. The whole chain empowers global creators, making large-scale model applications more targeted and effective. Currently, the “Tianmu” model has iterated on nearly 100 audio and video atomic capabilities. The live focus was on multimedia capabilities, including Wensheng themed videos, Wensheng 3D videos, AI singers, video AI soundtracks, and digital human broadcasts. At the same time, Wanxing Technology officially announced that it has reached a strategic computing cooperation with Zhongguang Tianze, a state-owned listed company of Radio and Television in Changsha, and reached computing power cooperation with HUAWEI CLOUD and Ma Investment and Computing Power (Changsha Malanshan Investment, Development and Construction Co., Ltd.), deepening strategic cooperation in the field of multimedia big models and computing power, consolidating the computing power base, and helping big model applications to accelerate their implementation.
The “Digital Creative Resources Mall Construction Project”, which changed some fund-raising purposes and strengthened its strategic layout in the field of digital creativity, is a digital creative material resource platform established and built by the company to promote industrial layout. Under reasonable investment and construction arrangements, as of December 31, 2023, the project has achieved a total benefit of 125.2663 million yuan (not audited by an accountant), and has achieved the expected benefits. In order to improve the efficiency of the use of the remaining funds raised, the company plans to continue to strengthen the copyright accumulation of the company's creative materials through a combination of external procurement materials and the company's own research, and use part of the raised capital to pay the remaining consideration for the acquisition of 72.44% of Hangzhou Gesang's shares.
Hangzhou GeXing is a mobile internet company focusing on the development and operation of overseas mobile video creative software products. It has launched a series of world-renowned apps including Sweet Selfie, Sweet Snap, StoryChic, and Beat.ly around application fields such as video creativity and graphic image processing. The company has strengthened its strategic layout in the field of digital creativity through the acquisition of Hangzhou Gexiang, and can better meet the multi-terminal collaboration needs of users.
Investment advice:
As a leading global enabler of next-generation digital creativity, Wanxing Technology fully embraces AIGC.
Considering that the company is still in the process of subscription transformation, investing heavily in product development and marketing, and the net profit margin is low, we use PS valuation. The company is expected to achieve operating income of 15.31/19.40/2,406 billion yuan in 2023/24/25, and achieve net profit of 0.95/1.46/219 billion yuan. Maintaining the buy-A investment rating, the 6-month target price is 112.73 yuan, which is equivalent to 8 times the dynamic market sales ratio in 2024.
Risk warning:
Product innovation incubation risk; SaaS transformation falling short of expectations; risk of exchange rate fluctuations.