Incident: The company released the 2023 annual report: in 2023, the company achieved operating income of 10.818 billion yuan, a year-on-year decrease of 26.59%; net profit attributable to shareholders of listed companies was 192 million yuan, an increase of 136.10% over the previous year; net profit after deducting non-return to mother was 126 million yuan, an increase of 79.99% year-on-year. Among them, the fourth quarter of 2023 achieved operating income of 2,578 billion yuan, a year-on-year decrease of 23.42%; net profit to mother of 78 million yuan, an increase of 274.40% year on year; net profit after deducting non-return to mother was 0.14 billion yuan, an increase of 131.38% year on year.
Business layout optimization and profitability improvement: In 2023, the company's gross sales margin was 6.33%, up 1.00pct year on year, and the net sales margin was 1.76%, up 1.24pct year on year, and profitability improved markedly. The main reason is that the company took the initiative to reduce its low gross profit business during the year. As a result, when the company's revenue declined to a certain extent, the net profit to mother increased dramatically.
Fully embracing AI, software and hardware collaborative development: The company further built a smart content ecosystem platform, accelerated the R&D and iteration of “AI+” application products, and fully penetrated the digital culture computing power base: application side, the company's virtual human IP “Jun Ruojin” and “LAN LAN” are used in e-commerce live streaming, IP endorsement, e-sports commentary, etc.; AIGC painting tool “Mi Wen”, the metaverse scene generation tool “Digital Warrior”, and marketing vertical industry copywriting models, etc., and the hardware has entered commercial applications one after another;, the company has The establishment of a wholly-owned subsidiary to provide computing power infrastructure and solutions for AI-related business and digital culture development will continuously promote the deepening and implementation of the digital culture industry and accelerate the construction of an ecologically driven digital culture industry system.
The quality and efficiency of digital marketing increased, and the international business developed smoothly: in 2023, the company continued to have a leading market share in the automotive industry segment in the brand marketing business, and achieved revenue of 3,043 billion yuan during the reporting period, an increase of 15.12% over the previous year. The company continues to deepen cooperation with NEV customers. Further expand customers in non-automotive sectors such as FMCG and finance. The Overseas Division reached a strategic cooperation agreement with CheilWorldwide Gyer Group to help Chinese brands do overseas business and cross-border e-commerce business.
Investment advice: Due to macro and other factors, the recovery of the advertising industry fell short of expectations. Combined with the company's performance in 2023, we expect the company's net profit attributable to shareholders of listed companies in 2024-2026 to reach 2.27/2.53/277 million yuan in sequence, up 18.20%/11.45%/9.56% year-on-year. The corresponding PE is 30x/27x/25x, maintaining the “recommended” rating.
Risk warning: innovation risk under rapid iteration and upgrading of technology, risk of insufficient or lost core technical personnel, risk of impairment of goodwill and assets, risk of macroeconomic fluctuations, etc.