Net profit of 23 million yuan, an increase of 105%, was in line with the performance forecast. The rating was lowered to “increase” the company's 23 annual report & 24Q1 quarterly report: 23 billion yuan in revenue of 52,616 billion yuan (yoy +43.44%), net profit of 117 million yuan (yoy +105.36%), in line with the performance forecast (1-150 million yuan). After deducting non-net profit of 150 million yuan (yoy +107.91%); 24Q1 revenue of 15.78 billion yuan (yoy +61.47%), net profit of 82 million yuan (yoy -44.65%), deducting non-net profit of 80 million yuan (yoy -41.3%). We expect net profit of 3.31/563/673 million yuan for 24-26. Considering that the company's 24-year performance is limited, stock costs are high. Comparable to the company Wind, the 25-year PE average is 23X. Considering the company's leading AIGC business layout and leading position in overseas advertising, we will give 25-year PE 30X with a target price of 6.9 yuan, and downgrade the rating to “increase holdings”.
Revenue is rising, but gross margins are under pressure
Non-net profit of 150 million yuan was deducted in '23, turning a loss into a profit compared to '22 (about 1.9 billion). From an endogenous perspective, bad debt provisions of about 300 million yuan were added in 23 years, and labor costs for restricted stocks were added. Adding these two effects, this corresponds to an endogenous net profit of about 526 million yuan. Revenue also increased by 43.44% in '23, mainly due to the recovery in the macro environment and the transfer of gross margins to some customers in exchange for revenue growth. The 23-year gross profit margin was 3.44%, down 1.25pct, mainly due to intense competition in the promotion service/advertising agency business throughout the case, and the company hedged the budget decline of some automobile and real estate customers to tap into the budgets of new customers, thereby freeing up part of the gross profit margin. The 23-year sales/management/R&D/finance expense ratio was 1.56%/1%/0.17%/0.11%, -0.7/-0.48/-0.03/-0.08pct. 24Q1 revenue also increased 61%, mainly due to sacrificing part of the gross margin expansion strategy; net profit to mother fell by about 45%, mainly due to: 1) the cost of additional restricted stocks was about 57 million; 2) the gross profit margin was 2.94%, down 2.04 pct.
AI strategy refocus: create more AI-driven revenue, drive BlueAI upgrades, and build AI Native's 24-year AI strategy with a clear focus: 1) Using AI to create more cases and revenue. AI-driven revenue was $108 million in '23, and the company is expected to grow by 5-10 billion yuan in '24; 2) Drive rapid iteration of BlueAI (the industry model launched by the company). In 24 years, BlueAI will continue to upgrade and evolve into a multi-modal, multi-scenario AI Agent (AI Agent) to create an enterprise-level marketing assistant; 3) Build an AI Native model:
Innovate at the organizational level, try to establish a pure AI operation-driven team, structure processes and drive the business with AI Native as the core; build new models of AI-native marketing, native content, or generative marketing.
Open up a second growth curve in overseas business, and build new capabilities combined with generative AI. The company believes that developing a second growth curve for overseas business and combining construction with generative AI is the core focus of the blue cursor. The company has experimented with AI influencer business, generative KOC, generative community marketing, and cross-border e-commerce (intelligent customer service, AI product design, AI diversion), etc., with good results. At the same time, in terms of overseas sales, the “affiliate marketing”, “cross-border DTC brand self-incubation”, and data and technology platform business built based on overseas small and medium-sized media have completed the 0-1 business phase, and is expected to achieve large-scale growth in the future.
Risk warning: Macroeconomic pressure is under pressure, and AIGC technology development falls short of expectations.