Active contraction led to a slowdown in revenue, but the number of customers increased significantly. In 2023, the company achieved revenue of 1,751 billion yuan, an increase of 12.4% over the previous year. In 2023, due to prudent considerations, the company actively contracted large projects in certain fields and actively reduced advance funding projects with high repayment risks and long account periods, resulting in a marked decline in revenue growth compared to previous years. The company currently has 9 major business segments, including the manufacturing sector, which achieved RMB 1,176.4 billion, an increase of 24.1% over the previous year, and the financial business line revenue was RMB 402 million, an increase of 5% over the previous year. In 2023, the fastest growth was automotive equipment (+38%), 3C high technology (+27%), engineering construction (+26%), food and beverage & new materials (new fields), and intelligent manufacturing training (new fields). The share of manufacturing revenue reached 67.2% in 2023, and is expected to reach 70% this year. In 2023, the total number of customers increased by 36% compared to 2022, reaching 397, 81 high-quality customers, and 81.5% of revenue.
After the adjustment, the net loss ratio was further narrowed, and the 24-year plan was to further reduce losses drastically. In 2023, the company's gross profit margin was 33.6%, an increase of 1 percentage point over the previous year, with a net book loss of 582 million yuan. In 2023, the company's share payment expenses increased significantly, and a larger bad debt calculation was carried out based on prudential principles. The adjusted net loss was RMB 154 million, a slight increase from 2022, but the adjusted net loss ratio continued to narrow compared to 22. The company's guidelines will continue to reduce losses drastically (after adjustment) in 2024, reduce losses by about 50%, and achieve an adjusted break-even balance in 2025.
At the end of the first quarter of 2024, the PMI index was above the boom and dry line, industry demand is expected to continue to improve, and the country's AI policy to empower the manufacturing industry is progressing. We believe that the trend of achieving break-even with steady development of the company's business will not change.
A large model with 75 billion parameters was released, and the application of the ChatX series of large models was gradually implemented. Starting in 2023, the company implemented AI1.0 and AI2.0 dual tower development. AI2.0 gradually launched the application implementation and preliminary research of the ChatX series vertical model, and released the ANNOGC-75B industrial model (75 billion parameters) at the end of March this year, adding multiple modes to the 15B model. Currently, ChatX includes 5 major launched products, including ChatBI, ChatDoc, Chatvision, ChatCAD, and Chatrobot. The company's nine major segments cover the company's five major scenarios of industrial software, digital intelligence software, industrial logistics, intelligent equipment and industrial sustainability. ChatBI has implemented industrial software and digital intelligence software scenarios in the field of intelligent food and beverage manufacturing, and ChatDoc and Chatvision have been implemented on the scale of industrial sustainability scenarios. ChatCAD has more room for imagination in the field of CAD industrial design. Through large models, traditional CAD design models can be rewritten, and CAD design can be carried out directly through text and language, greatly improving CAD design efficiency. It is expected that the company will begin practical work on implementing ChatCAD this year. ChatRobot is a large-scale model-driven industrial robot that automatically arranges tasks, drives, and implements work deployment. The company already gave a live demonstration at the big model press conference. Although it is still in the pre-research and verification stage, it already has initial prospects for implementation in industrial applications, and has great potential.
We believe that in the field of large-scale models, the company has developed a broad range of application scenarios, clear requirements, feasible implementation, large-scale implementation, and sufficient continuous driving force for the company's “AI+ manufacturing”.
Investment advice. The company's revenue for 2024-2026 is expected to be 20.10 (-19.7%)/23.69 (-27.4%)/RMB 2,863 billion, respectively, and the revenue CAGR for the period 2022 to 2025 is 15%. As the company actively reduced its performance growth rate in 2023 and the company continued to maintain a cautious development mindset in 2024, we lowered our revenue expectations for the next three years.
In 2024, the average PS of comparable companies was 11 times, the average PS of American companies was 15 times, and the average PS of Chinese companies was 7 times. Taking into account factors such as the company's revenue growth rate, gross margin level, industry position, and the differentiated competitive advantage of the company's industry and strong demand circuit, we gave Innovation Qizhi 5.5 times PS in 2024 (originally 8 times in 2023), then the target market value was RMB 11.057 billion, and the target price was RMB 19.57 per share, corresponding to HK$21.18 per share (-29.4%), maintaining a “superior to market” rating.
If you compare the current market value of AI companies in Hong Kong stocks and A-shares horizontally, without considering the impact of liquidity and unbanned stocks on stock prices, judging from the fundamentals of the current company's revenue scale, business growth, break-even expectations, and progress in implementing the big model, it is reasonable for the company's market value to be around HK$10 billion.
Risk warning. Liquidity and the depressing effect of unbanned stocks on a company's stock price. The slowdown in the company's revenue in the manufacturing sector affected the overall revenue growth rate. Increased industry competition led to factors such as the company's gross margin growth falling short of expectations, large-scale commercial implementation falling short of expectations, and overseas restrictions affecting relevant market valuation levels.