Incidents:

The company released the “2023 Annual Report” after closing on March 26, 2024.

Comment:

The two major businesses are working at the same time, and revenue and profit have grown rapidly

In 2023, the company was deeply involved in the field of education informatization, focusing on the two major business directions of smart testing and smart education, implementing the “one main and two wings” development strategy, increasing market development efforts, launching new products in segmented fields, building an ecological cooperation circle, and enhancing industry-research cooperation, and achieved good work results. The company achieved annual revenue of 604 million yuan, an increase of 46.47% over the previous year; achieved net profit of 131 million yuan, an increase of 90.05% over the previous year. The sharp increase in performance was mainly due to simultaneous efforts in the two major business areas of smart testing and smart education, and orders increased significantly. By product, standardized test site products and overall solutions for educational examinations achieved revenue of 421 million yuan, an increase of 56.24%; smart education products and overall solutions achieved revenue of 117 million yuan, an increase of 55.20% over the previous year; and operating services achieved revenue of 0.28 million yuan, an increase of 31.58% over the previous year.

Product upgrades are speeding up, and orders for core products have soared

In 2023, the company optimized, streamlined and upgraded the original product line, and launched new products such as “Integrity Smart Security Gate Solution”, “Physical and Chemical Experimental AI Solution”, “Physical Education AI Solution”, and “English Machine Test AI Solution”, which received a good response in the market. Among them, the security gate program has been deployed and implemented in college entrance examinations and university postgraduate examinations in many provinces and cities. Physical and chemical experimental AI solutions have successfully completed the construction of benchmark demonstration projects in many regions, and AI solutions for physical education have been implemented in more than 10 provinces including Beijing, Shanghai, Inner Mongolia, Sichuan, and Guangdong, serving hundreds of schools and tens of thousands of teachers and students. In addition, sales of core products at the company's standardization test sites continued to grow, and major projects at regional standardization test sites such as Guizhou and Tibet were successfully implemented, which contributed to a significant increase in the company's annual performance.

Fully launch the “AI+” strategy and build the 10-billion-parameter Linggu Education Model. In 2023, the company fully embraced AI, launched the “AI+” strategy, and simultaneously completed the release of the Linggu Education Model and AI series products. The Linggu Education Big Model is a product focused on core application scenarios in the education industry. It has 10 billion level parameters. Through special data in the education field, secondary pre-training of 10 billion token training data is completed. It has stronger adaptability and higher performance than the general model in education scenarios. Accuracy and better performance. Driven by the “AI+” education strategy, the company comprehensively upgraded its product matrix, used artificial intelligence technology to continuously improve product capabilities and application value, explore new scenarios and applications, and better empower education.

Profit forecasting and investment advice

With the digital transformation of education and the continuous application of artificial intelligence in the field of education, education's demand for informatization construction will maintain steady growth, and the market will usher in a wider development space, and the company is expected to fully benefit. The company's revenue for 2024-2026 is estimated to be 8.22, 10.74, and 1,348 million yuan, net profit due to mother of 1.96, 2.68, and 349 million yuan, EPS of 0.49, 0.67, 0.87 yuan/share, and corresponding PE of 26.36, 19.25, and 14.81 times. Maintaining a “buy” rating considering the boom in the industry and the company's future growth potential.

Risk warning

Risk of delayed implementation of policies; risk of high industry dependency; risk of gross margin fluctuation; management risk; technical risk.