Incident: On March 26, 2023, the company released its 2023 financial report. In 2023, it achieved revenue of 3.406 billion yuan (YoY -10.6%), gross profit of about 1.5 billion yuan (YoY -41%), gross margin of 44.1% (YOY-22.7pct), annual loss of about 6.495 billion yuan (loss increased by 6.6%), and EBITDA loss narrowed to 5.4 billion yuan (loss narrowing by 2.2%).
The generative AI business is growing rapidly, and the traditional AI business has shrunk across the board. In 2023, the company re-defined the three business segments of generative AI, traditional AI business, and smart cars. Among them, generative AI revenue reached 1,184 billion yuan, a year-on-year growth rate of 200%, and its share of the Group's revenue increased by 24.4 pcts to 34.8%. It mainly benefits from the company's layout from low-level computing power to models and commercial implementation. Shanghai Lingang AIDC has launched 45,000 GPUs, and has an operating computing power of 12,000 P, serving leading companies such as Xiaomi, Reading, and Weibo. The model side continues to be upgraded and iterated. The “Nisshin” large model series has been iterated to version 4.0. The performance in scenarios such as code writing and data analysis is close to GPT-4, fully benchmarking the “Nichi-Nisshin 5.0” version of GPT-4 Turbo, which may be released in April 2024. Commercial applications continue to be implemented, and breakthroughs have been made in finance, medical care, smart terminals, etc. The traditional AI business contracted, with revenue of 1,838 billion yuan in 2023, down 41.1% year on year, accounting for 28 pct to 54% of the group's total revenue, mainly due to the company's active contraction of the smart city business. In 2023, the share of smart city-related business revenue fell from about 30% in 2022 to less than 10% in 2023, and is likely to continue to decline. The smart car business maintained steady growth. In 2023, the “Brilliant” smart car business revenue was 384 million yuan, up 31.1% year on year, accounting for an increase of 3.6 pct to 11.3% year over year in total revenue. Mass production and delivery increased by 1.29 million vehicles, an increase of 163% over the previous year. Zhuying delivered a total of 1.95 million vehicles, covering more than 90 models, and added more than 16 million fixed-point orders.
Gross profit is under pressure, and losses have not narrowed. In 2023, the company's sales cost reached 1.905 billion yuan, a year-on-year increase of 50.5%, mainly due to customer demand in 2023, which led to an increase in hardware and AIDC related costs. The company's gross profit fell 41% year on year to 1.5 billion yuan, and gross margin fell 22.7 pct year on year to 44.1% year on year. Optimization expenses. R&D, sales, and administrative expenses all declined. Among them, R&D expenditure fell 13.7% year on year to 3.466 billion yuan, sales expenditure decreased 9.1% year on year to 819 million yuan, and administrative expenses decreased 3.6% year on year to 1,511 billion yuan. Losses have not narrowed. Among them, annual net loss was $6.495 billion, up 6.6% year on year, and adjusted net loss increased 14.3% year on year to loss of 5.414 billion yuan.
Profit Forecasts, Valuations, and Ratings
We expect the company's 2024-2026 revenue to be 47.7/58.9/6.77 billion yuan, respectively, with year-on-year growth rates of 39.9%/23.6%/15%, respectively, net profit to mother of -33.7/-26.5/-1.96 billion yuan, and EPS of -0.1/-0.08/-0.06 yuan/share, respectively. We recommend that you keep an eye on it.
Risk warning: AI technology implementation falls short of expected risks, competition increases risks, and AI regulatory risks.