Introduction to this report:

Smart driving business: It will develop overseas and overseas, and revenue will maintain a high increase. Commercial advertising business: AIGC will promote video generation and launch apps. Commercial advertising is a natural scenario for AIGC implementation, focusing on promotion and rapid promotion.

Key points of investment:

The target price was lowered to 38.1 yuan to maintain the “gain” rating. Based on our predictions of the company's smart driving, commercial business development and market expansion, the profit forecast for 2024 and 2025 was lowered, and the profit forecast for 2026 was added. The 2024-2026 EPS is expected to be 0.36 (-0.26), 0.48 (-0.31), and 0.60 yuan. Considering that the company is still increasing its R&D and promotion period, refer to the comparable company's PS 4.55 times in 2024, lower the target price to 38.1 yuan, and maintain the “gain” rating.

The 2023 results were largely in line with expectations, and 2024Q1 grew steadily. The company is the world's leading visual artificial intelligence company. In 2023, the company achieved revenue of 670 million yuan, a year-on-year increase of 26%, and net profit of 88.49 million yuan, an increase of 53% over the previous year. The performance was basically in line with expectations. R&D personnel investment and sales expenses were increased in 2023. 2024Q1 achieved revenue of 180 million yuan, a year-on-year increase of 14%, net profit to mother of 34.17 million yuan, an increase of 21% over the previous year, and steady operation.

Smart driving business: With efforts overseas and outside the cabin, revenue will maintain a high increase. Overseas in 2024, the first is to use the competitive advantage of compliance capabilities to help domestic car companies explore the international market, and the second is to continue to develop new designated projects for overseas car models. The exterior of the cabin will accelerate the commercialization process of Westlake, a front-mounted software and hardware integrated solution. It is expected that with the maturity and expansion of products, the revenue of the smart driving business will continue to grow rapidly in 2024, supported by the mobile vision industry to increase related R&D and market development expenses.

Commercial sales business: The focus is on promoting innovation and rapid promotion. AIGC video generation will be promoted in 2024, and the product features of the Iterative PhotoStudioAI clothing version and commercial version will be updated. The PhotoStudioAI personal terminal application is expected to be launched in 2024. Commercial advertising is a natural scenario for AIGC implementation. There is no need for market education. It is also a high-frequency scenario. The focus is on promotion and rapid promotion.

Risk warning: risk of going overseas, risk of iterative upgrading of technology, failure to advance AIGC as expected, etc.