Key points of investment
The latest breakthrough in the AI industry: OpenAI achieved a technological breakthrough in Wensheng Video. On February 16, 2024, OpenAI released the video generation model Sora. At the functional level, Sora can achieve:
Wensheng videos, still images are converted into videos, and existing videos are expanded. AI-generated video has made revolutionary advances at the technical level, and video duration and simulation effects have improved markedly. 1) The video duration exceeded one minute for the first time. Pika can only generate 15 seconds of video, and Runway Gen 2 can only generate 18 seconds of video. 2) Four major simulation capabilities make the generated video more realistic: 3D consistency, long-term continuity and object persistence, the ability to interact with the real world, and the ability to simulate the digital world.
Wanxing Technology takes video creativity as the core, and advances in card slot AIGC core scene technology bring opportunities to video creative software manufacturers. 1) The company is a domestic creative software leader. The product line covers video and graphics, and is suitable for the output scenarios of AI models in various modes; video creative products are the company's core revenue source, and Wanxing Meow is the largest single product in the video creative software product line. In 2022, we achieved revenue of 1.18 billion yuan, of which video ideas accounted for 63.1%. 2) The company has more than 20 years of experience in operating overseas products. The core product Filmora was connected to OpenAI last year, and it is expected that it will continue to benefit from the development of new technologies such as Sora, and the core products will usher in opportunities for change.
Actively embrace AIGC and release the big “Tianmu” multimedia model
1) On January 30, 2024, the company released the “Tianmu” multimedia model. As the first multimedia model in China to focus on creative video applications, “Tianmu” has multimedia functions such as Wensheng themed videos, Wensheng 3D videos, AI singer covers, video AI soundtracks, digital human broadcasts, etc., and many indicators of all abilities are higher than the industry average, which will empower the core product line video creative products to improve user experience and help business growth. 2) The company added and upgraded AI functions to the original traditional products, and quickly released AIGC's innovative products. In the past year, new AIGC products such as Pixpic, Wanxing Aibu, Wanxing Broadcom, and Kwicut were launched.
One of Huawei's ecosystem partners, actively promoting subscription-based transformation.
1) The company is a Huawei ecosystem partner, and many products are pre-installed in the Hongmeng system. The company is a Huawei ecosystem partner, and various products are pre-installed in the Hongmeng system. In August 2023, the company's Yitu and others signed a deepening cooperation agreement with Huawei. In September 2023, the company signed a strategic cooperation agreement with HUAWEI CLOUD. 2) In recent years, the company has deepened the transformation of the subscription model, driving a continuous increase in user stickiness. The share of subscription revenue and renewal rates have continued to increase. The share of 2023H1 subscription revenue has increased to 72%, and the subscription renewal rate has increased to 65%.
Profit forecasting and valuation
The company continues to improve product strength, continuously improve marketing channels, and actively deploy AIGC. We expect the company's revenue for 2023-2025 to be 1,517, 18.68 billion yuan, 2,242 billion yuan, and net profit to mother of 0.80, 1.15, and 158 million yuan. The current stock price corresponds to PE 145/101/74, and PS 8/6/5. Maintain a “buy” rating.
Risk warning
Risk of new technology research and development falling short of expectations; risk of rising marketing costs; risk of falling short of expectations in emerging markets; risk of exchange rate fluctuations.