Incident: In 2023, the company achieved revenue of $52,616 billion, an increase of 43.44%; net profit to mother of 117 million yuan, which was corrected year on year; and achieved net cash flow of 633 million yuan from operating activities.
With 2024Q1, the company achieved revenue of 15.78 billion yuan, a year-on-year increase of 61.47%; net profit to mother was 82.325 million yuan, a year-on-year decrease of 44.65%.
The overall promotion and overseas business achieved strong growth, and business potential was gradually unleashed. In 2023, Chinese brands accelerated their global expansion, and the company's overseas business continued to gain strength, and operating potential was further unleashed. Both revenue and gross margin of the overseas business increased by 41.69% year on year to 37.36 billion yuan, and gross margin reached 1.66%, up 0.16 pct year on year. In 2023, the total promotion business achieved revenue of 11.28 billion yuan, an increase of 73.05% over the previous year. We believe this mainly benefited from the increased willingness of advertisers to launch after the pandemic. Looking ahead to 2024, opening up a second growth curve for overseas business and building new capabilities combined with generative AI will become the company's core focus. As the overseas business continues to expand, its scale and profitability are expected to maintain an upward trend.
Net profit changed from negative to positive year over year, and various factors such as AIGC investment, credit impairment losses, and equity incentive costs weighed on net interest rates. In 2023, the company's gross margin reached 3.44%, a year-on-year decrease of 1.25pct. On the cost side, in 2023, the company actively promoted the integration of AI with the main business and increased investment in AI technology; in addition, the company has completed the 2023 revenue growth rate target in the equity incentive plan, generating 76.35 million yuan in incentive costs, which are included in management expenses; if the target is achieved in the future, it will generate 178/51 million yuan in incentive costs in 24-25 years; compounded by the impact of credit impairment losses, the company's net profit to mother was 117 million yuan, and the net profit margin was 0.22%. Looking at a single quarter, the 24Q1 company's gross margin was 2.94%, and the net margin was 0.52%.
Adhering to the All in AI+AI first strategy, AI-driven revenue is expected to grow. The company proposed a firm All in AI strategy in early 2023 and released the industry application model BlueAI in September 2023. In 2023, the company created nearly 300 real AI marketing cases, and AI-driven revenue reached 108 million yuan. In 2024, the company expects this portion of revenue to grow by around RMB 5-10 billion. The company continues to use generative AI to empower its main business, and its use as an internal tool is expected to help the company reduce costs and increase efficiency in the long term; in addition, the continuous iteration of Blue AI will also drive the company's long-term development, and AI-driven revenue is expected to grow rapidly in 2024.
Profit forecast and investment rating: The company's revenue grew rapidly in 2023, and net profit was affected by AI investment, impairment losses and incentive costs. We lowered the company's 2024-2025 net profit from 588/850 million yuan to 39/61 million yuan, and the estimated net profit to mother in 2026 is 740 million yuan.
We are optimistic about the company's business advantages, AI empowers the main business, and maintains a “buy” rating.
Risk warning: Imperfect development of AI-related technologies/applications, risk of credit impairment, increased risk of industry competition