Key points of investment

The company released its 2023 annual report, achieving operating income of 1,496 billion yuan, an increase of 25.18% over the same period of the previous year. Net profit attributable to shareholders of listed companies was 325 million yuan, an increase of 44.31% over the same period of the previous year, after deducting net profit of 187 million yuan, an increase of 1.57% over the same period last year.

Various businesses grew steadily, and net operating cash flow increased

The company's revenue grew steadily in 2023. Among them, the collaborative office product line revenue was 462 million yuan, an increase of 30.48% over the same period last year, the smart channel product line revenue was 616 million yuan, an increase of 23.00% over the same period last year, and the cloud and big data product line revenue was 335 million yuan, an increase of 53.23% over the same period last year.

Net profit due to the high increase in 2023 is mainly due to the steady increase in the company's revenue. On the other hand, income from changes in fair value contributed greatly to profits. Net profit after deducting non-return to mother increased slightly, and the impact of impairment of the goodwill of subsidiaries was significant.

Net cash flow from operating activities in 2023 was $177 million, up 42.51% year over year.

The cost control effect is good, and high R&D investment is fueling growth

In 2023, the sales/management/R&D expense ratio was 3.84%/3.91%/17.48%, respectively. The sales expense ratio increased by 0.13 Pcts year on year, the management fee ratio decreased by 0.84 Pcts year on year, and the R&D cost ratio increased by 0.08 Pcts year on year. Compared with 2023, the total cost control effect was 0.63 Pcts, and the cost control effect was good.

The company continues to invest in research and development to build AI technology capabilities, focusing on digital people and AI+ application innovation fields, building MMS RicHai, and launching the AIBox AI AI engine. The company's R&D investment in 2023 increased by 26.97% over the same period last year.

The product business was upgraded, smart email was connected to Kimi, and the computing power business was expanded. In 2023, the company released a new-generation smart email product demo, connected to basic models such as Wenxin Yiyan, Baichuan Intelligence, Zhisu ChatGLM, and Kimi to achieve intelligent letter writing, intelligent summarization, email classification and organization, and exclusive email secretarial capabilities.

The company has incubated many commercial digital human products such as 5G video secretaries, digital human outbound calling, and digital human asset management. Related projects in 2023 include the 2023-2024 virtual digital human system image and operation tool project for online service companies, China Mobile Internet and video secretary capability cooperation projects.

In the field of computing power, along with the development of artificial intelligence and strong demand for computing power, the company cooperated with Baixin Information Technology Co., Ltd. to jointly promote and sell Shengteng server products.

Profit forecasting and valuation

The company's revenue for 2024-2026 is estimated to be RMB 1,848, 22.87 and RMB 2,828 million, net profit to mother of RMB 3.68, 4.41, 540 million yuan, and EPS of RMB 0.82, 0.98, and 1.21 yuan/share, maintaining a “buy” rating.

Profit forecasting and valuation

Market competition risks, AI product implementation falling short of expectations, rising labor costs, and risk of brain loss.