Incident: The company announced its 2023 performance forecast. In 2023, the company expects to achieve net profit of 100-150 million yuan and net profit after deducting non-net profit of 13—180 million yuan, all turning a loss into a profit over the previous year. At the same time, the company achieved a breakthrough increase in annual revenue, exceeding RMB 52 billion; net cash flow from operating activities exceeded RMB 600 million.
Revenue reached a record high, and the share of overseas business increased to reduce the company's profit level in the short term. The company's annual revenue exceeded 52 billion yuan, a record high, mainly due to rapid growth in overseas business revenue.
Due to the relatively low gross margin of overseas business, the company's profitability may decline in the short term. Judging from the types of advertisers, overseas e-commerce advertisers may contribute to the main revenue growth rate. Looking backwards, the company is expected to enhance its service value through AI technology, compounding the gradual recovery of the global economy. We believe that the company's gross profit from overseas business still has high room to improve and drive the company's profitability to increase.
The “All in AI” strategy was upgraded to “AI First”, which is expected to open a new chapter in business development. According to a recent speech by Blue Cursor CEO Pan Fei, AI-driven business efficiency was between 30% and 1000%, highlighting business scenarios that were more than ten times more efficient; by the beginning of '24, Blue Cursor had created more than 300 marketing cases through generative AI; of these, more than 1/3 of the cases were deeply driven and brought large-scale revenue, and AI-driven revenue was over 100 billion. At present, the company has basically achieved 100% application of AI for all employees, and will pursue “AI First” on the basis of All in AI, putting AI-related matters first. We believe that AI has a strong synergy with the company's business, and the support of AI is expected to open a new chapter in business development.
Blue AI continues to iterate and evolve into an AI Agent. The company launched the industry application model Blue AI in September 23, and will continue to evolve into an AI Agent based on this in 2024 to adapt to diverse business scenarios and become the foundation for AI First innovation. At the same time, Blue AI will continue to explore in the direction of AI Native to fully enhance the ability of large models to understand graphics and videos and generate across modes. The quality of AI native content is expected to continue to improve, thus revolutionizing the production paradigm of the advertising and marketing industry.
Investment advice: We expect the company to achieve revenue of 522.98/578.37/62,094 billion yuan in 2023-2025; net profit to mother of 1.10/5.02/642 million yuan; EPS 0.04/0.20/0.26 yuan. The corresponding PE was 161.4/35.3/27.6 times, respectively, maintaining the “gain” rating.
Risk warning: Economic recovery falls short of expectations; competition in the game industry intensifies; policy changes related to the game industry; product launch performance falls short of expectations.