Core views:

24Q1 performance exceeded expectations, and expenses continued to be optimized. The company released its 2024 quarterly report. During the reporting period, the company achieved revenue of 110 million yuan, yoy +68.5%, slightly exceeding our expectations; net profit to mother was 6.53 million yuan, yoy +87.3%. Continuous cost optimization: The sales expense ratio was 15.91%, down 7.07pct from 23q1; the R&D expense ratio was 10.50%, down 5.49pct from 23Q1. Management expenses increased due to share payments, increasing by 92.94% year-on-year to 21.545 million yuan. The management fee ratio was 18.92%, up 2.40 pcts from 23Q1.

Follow the implementation progress of smart security gates, test behavior analysis Al solutions, etc. China's standard inspection construction continues to be updated and upgraded, and the company has launched corresponding products and solutions: 1. Intelligent security gates:

For the first time, the 2023 college entrance examination required the use of intelligent security gates (data source: CCTV News); 2. Test behavior analysis Al solution: supports AI inspection, targeted monitoring, and data analysis, and can achieve real-time analysis during the exam and playback analysis after the exam (data source: company's official account). Currently, only AI technology is being applied to test behavior analysis on a pilot basis in Liaoning and Qingdao (data source: Liaoning Admissions Examination Window, Shandong Education Department's official website).

The company continues to deploy “AI+” education applications. 1. Cooperate with Tencent and Huawei to release the self-developed “Linggu Education Big Model”. 2. The company's AI product matrix is constantly being upgraded. (1) Build a new generation of English solutions based on the big language model AI base. Currently, the company has launched a closed beta version of the AI English Learning Assistant. Referring to Duolingo, the company is expected to open up a 2C business space. (2) Launch an AI solution for physico-chemical experiments; (3) Launch an AI solution for physical education based on our own “AI Hawkeye Technology”. (Data source: The above are all from the company's official account)? Profit forecasting and investment advice. EPS is expected to be 0.50/0.67/0.90 yuan/share in 24-26, giving the company 35X PE in 2024, a reasonable value of 17.52 yuan/share, maintaining a “buy” rating.

Risk warning. The implementation of education informatization policies fell short of expectations; the uncertainty of downstream end-user budgets and procurement plans; and the promotion of new smart education products fell short of expectations.