Incident: The company released its 2023 annual report, achieving revenue of 1,496 billion yuan, a year-on-year increase of 25.18%, net profit to mother of 325 million yuan, a year-on-year increase of 44.31%, and net profit after deducting non-return to mother of 187 million yuan, an increase of 1.57% over the previous year.

Here are our reviews:

In the context of the AI wave and digital economy, the three major product lines continued to grow steadily in 2023, generative AI technology represented by big models set off a new wave of global AI technology development. Driven by the country's various policies to promote the healthy development of the digital economy, the company achieved double growth in revenue and net profit, and the three major product lines continued to grow steadily:

Xinchuang continued to prosper. Smart email products were launched, and the collaborative office product line grew steadily, with revenue of 462 million yuan in 23 years, an increase of 30.48% over the previous year. The ****nchuang product, the RichMail Xinchuang secure email system, continues to be widely recognized by the market. Key customers have signed contracts with remarkable results, and customer stickiness continues to increase. The main clients of the collaborative office include: China Mobile, China Unicom, Bank of China, China Life Insurance, Bank of Shanghai, Bank of Jiangsu, Bank of Tianjin, China Southern Airlines, Air Macau, British Life Insurance, Bank of China Securities, China Minmetals, etc. Within 23 years, the company released a demo of the next generation smart email product, using basic models such as Wenxin Yiyun, Baichuan Intelligence, Zhipu ChatGLM, and Kimi to achieve intelligent letter writing, intelligent reply, intelligent summarization, email classification and organization, and dedicated email secretarial capabilities to solve problems such as traditional emails that take a lot of time and effort, are too difficult to sort and manage, and easy to miss important emails, and help users process and manage emails more efficiently.

Digital people in the metaverse contributed new momentum, innovated and upgraded the smart channel product line, and generated revenue of 616 million yuan in 23 years, an increase of 23.00% over the previous year. In 2023, the company successfully renewed key projects such as China Mobile Mobile Business Office, China Mobile's unified certification, China Mobile's unified portal, China Mobile's online electric channel technology support, ICBC Peony Card Center e-lifestyle platform, and Guangdong Mobile Guangdong 5G, providing a solid business foundation for the smart channel product line, fully demonstrating the professional operating strength and service advantages the company has accumulated over the medium to long term in this product line. As AI technology continues to advance, the application scenarios and functions of the metaverse and digital humans are also constantly expanding. Caixun applies artificial intelligence technology to metaverse scene construction, content generation, etc., to achieve metaverse interactive experiences, intelligent information management, and the ability to build digital twins globally. The company has incubated many commercial digital human products such as 5G video secretaries, digital human outbound calling, and digital human asset management.

The deepening of operators' state-owned cloud cooperation led to high-quality growth in cloud and big data product lines, with revenue of 335 million yuan in 23 years, an increase of 53.23% over the previous year. The cloud business has made significant progress in 2023. As the core supplier of mobile cloud certification, the company cooperates with customers by providing professional consulting services and solutions, high-quality delivery and services that exceed expectations to assist customers in business development and delivery implementation nationwide, and has continuously received unanimous approval from customers. On the C-side, help customers develop smart cloud disk assistants to achieve intelligent functions such as Tusheng text, Wensheng maps, live photos, AI comics, smart cutouts, and restoration of old photos, greatly increasing the activity of C-side users.

In the field of computing power, along with the development of artificial intelligence and strong demand for computing power, the market size of servers equipped with Shengteng chips is also expected to grow; the company cooperated with Baixin Information Technology Co., Ltd. to jointly promote and sell Shengteng server products. The big data business has also made significant progress. Xintuo China Mobile Integrated Company's urban big data smart operation project helps customers make better use of massive data resources to achieve deep data mining and value release.

Continue to invest in R&D to build AI technology capabilities, focusing on digital people and AI+ application innovation. Companies continue to invest in research and development in AI capacity building, build MMS RiChai, and launch the AIBox AI AI engine. Through the ability to introduce general-purpose large models, technical components from many fields have been upgraded and integrated.

MMS AIBox will be a bridge connecting general artificial intelligence with private domain application scenarios, supporting the implementation of multiple intelligent scenarios for future enterprise customers, and comprehensively and efficiently improving the level of enterprise intelligence. Furthermore, in addition to the capacity building of AI platforms, the company actively invests in digital people and AI+ application innovation, focusing on developing products such as next-generation smart mailboxes, smart cloud disks, and virtual digital humans. In '23, the company's R&D personnel accounted for a relatively high proportion, reaching 69.86%. R&D investment was 300 million yuan, an increase of 26.97% over the previous year, and R&D investment accounted for 20.02% of revenue.

Profit forecasts and investment suggestions:

The company is deeply involved in the digital economy, actively embraces AIGC technology, and has strong R&D capabilities. Along with the development trends of the Xinchuang industry and state-owned clouds, the number of orders is expected to grow rapidly in the future. Considering the company's innovative layout or generating significant investment and profitability, it is estimated that the net profit due to mother for 24-26 will be $3.40/4.32/541 million (the original value for 24-25 was $395/506 million), corresponding to PE of 23/18/14X, maintaining a “buy” rating.

Risk Warning: Increased industry competition, AI development falls short of expectations, Xinchuang development falls short of expectations, state-owned cloud development falls short of expectations, rising labor costs, and risk of brain loss