The company's performance is growing steadily. It is optimistic about the C-end digital human and XR content layout, and maintains that the “buy” rating company achieved operating income of 1,245 million yuan in 2023 (+16.7% year over year) and net profit of 264 million yuan (+11.5% year over year). Among them, AR/VR marketing service revenue was 845 million yuan (+24% year over year), mainly due to an increase in the number of media terminals and average advertisers' consumption, as well as the expansion of AR/VR marketing services overseas and achieved 100 million yuan in revenue. AR/VR content revenue was 334 million yuan (-0.65% YoY), and the number of customers and projects increased year over year. AR/VR SaaS service revenue of 58 million yuan (+31.7% YoY) is mainly due to the increase in the number of AR/VR SaaS platform paying users by 103% compared to 2022 to 9283, while the number of customized AR/VR SaaS projects increased 26% to 402 compared to 2022. Based on the company's performance and business expectations, we lowered 2024-2025 and added a profit forecast for 2026. The company's net profit for 2024-2026 is expected to be 3.32/397/464 million yuan respectively (the previous value of 2024-2025 was 413/512 million yuan), corresponding EPS was 0.18/0.22/0.26 yuan respectively, and the PE corresponding to the current stock price is 3.0/2.5/2.1 times, respectively. We are optimistic that the company's C-side business development and XR content layout will drive the company's performance growth. Maintain a “buy” rating.
The digital human matrix has accumulated more than 5 million fans. It is expected to accelerate the commercial monetization process in 2023. For the To-C side, the company has expanded digital human development and operation services, created virtual images of digital people such as Li Haoya and Mo Xiaoyu, and also provided full-link digital human solutions for many industry customers, including Dunhuang Cultural Tourism Group. As of 2023, the company's digital virtual human matrix has accumulated nearly 5 million followers, and it is expected that the commercialization process will begin through various methods such as fan economy, commercial cooperation, and live streaming delivery. At the same time, the company is developing a digital live streaming solution using MR equipment as a platform, which is expected to enable scenarios such as cultural tourism live streaming, e-commerce live streaming, etc., and further open up space for digital human monetization.
XR content layout and AI are expected to form the company's second growth curve. The company collaborated with Lanting Digital to jointly produce the XR version of the “B50” Golden Song concert by the famous Chinese girl group SNH48. Furthermore, based on industry and project experience, the company continues to develop and iterate its own AI vertical models to improve the efficiency of 3D content and digital human development and operation, and is expected to open up to the public in the form of a SaaS platform or solution. We believe that with the popularity of MR devices such as Apple Vision Pro in the C-side market, the demand for MR content is expected to increase dramatically, driving the company's XR content business to grow rapidly.
Risk warning: C-side business development falls short of expectations, demand for XR content falls short of expectations, etc.