Revenue increased slightly in '23, putting pressure on short-term deductions for non-net profit
Hanwang Technology released its annual report. In 2023, it achieved revenue of 1,450 million yuan (yoy +3.56%), net profit to mother of 135 million yuan (yoy +0.65%), and deducted non-net profit of 157 million yuan (yoy -12.82%). Among them, Q4 achieved revenue of 478 million yuan (yoy +0.65%, qoq +35.80%) and net profit to mother of 449.087 million yuan (yoy +50.29%, qoq -18.20%). We expect the company's 2024-2026 EPS to be 0.32, 0.41, and 0.49 yuan respectively (previous value of 0.13, 0.45 and 0.53 yuan in 2023-2025). Comparatively, iFind agreed that the average PE value in 24 was 97.7 times, giving the company 97.7 times PE in 24, with a target price of 31.26 yuan (previous value 25.74 yuan), maintaining a “buy” rating.
The AI terminal business became the second growth curve, and the broadening of channels led to an increase in sales expenses of 864 million yuan in the smart interaction business revenue, +0.18% year-on-year, and a gross profit margin of 43.10%, and +1.23pct year-on-year. AI terminal business revenue was 323 million yuan, +30.36% YoY, gross profit margin 41.12%, +2.76% YoY. The share of AI terminal business revenue increased from 17.69% in '22 to 22.27% in '23, making it the company's second-largest growth curve. The sales/management/ R&D expenses rate was 29.40%/8.23%/16.95%, +3.91 pct/-1.66 pct/+2.70 pct compared to the previous year. Among them, the increase in the sales expense ratio was due to the expansion of the company's advertising channels in 23, and the increase in R&D expenses was due to further investment in AI models and related technologies. Net operating cash flow was -62.6979 million yuan, -74.41% year-on-year.
The big model enabled electronic cost revenue to increase by 273%. The multi-modality will be the future iteration direction of the Han Wang Tiandi Big Model, which was released in '23 and passed the filing in '24. It has the characteristics of “data privatization, low cost computing power, deep specialization, real-time knowledge, and accurate generation”. It has already implemented products such as smart office books and electronic paper study books to achieve record organization and intelligent question judgment functions. Empowered by AI, e-paper business revenue increased 273% year over year in '23, revenue exceeded 100 million, and gross margin increased 10% year over year.
Furthermore, the release of Sora has once again triggered market expectations for multi-modal iteration of the model. The company has begun research and development of speech recognition, speech synthesis, and voiceprint recognition technology to improve core multi-modal recognition technology systems such as text, images, voice, and video, and is optimistic that the company's multi-modal technology will further empower AI terminal hardware.
Channel broadening+AI empowerment, the second growth curve is expected to accelerate
In 2023, the company further broadened advertising channels. On the basis of self-media platforms such as Douyin, Xiaohongshu, and Station B, it increased elevator and subway advertising in 60 cities, including Beihang, Guangshen, etc., and the e-paper GMV increased 8 times over the same period last year. We believe that under the premise of effective channel broadening, superimposing the company's world model and future multi-modal technology capabilities is expected to further drive sales of smart terminal products, and smart terminal products are expected to continue to accelerate as the second growth curve.
Risk warning: macroeconomic fluctuations, commercialization progress falls short of expectations.