Incident Overview
Flush released its report for the first quarter of 2024 on April 23, 2024. During the reporting period, the company achieved revenue of 619 million yuan, a year-on-year increase of 1.47%; realized net profit of 104 million yuan, a year-on-year decrease of 15.03%; and realized net profit without deduction of 99 million yuan, a year-on-year decrease of 14.58%.
2024Q1 Profits are under pressure, and cost investment is increasing
1) In terms of revenue, 24Q1 achieved revenue of 619 million yuan, an increase of 1.47% over the previous year. The average daily turnover of 2024Q1A shares was about $895.37 billion, up 1.89% year on year.
2) In terms of profit, 2024Q1 achieved net profit of 104 million yuan to mother, a year-on-year decrease of 15.03%.
3) In terms of gross margin, 2024Q1's gross margin was 82.54%, an increase of 0.14pct over the previous year.
4) In terms of cost ratio, 2024Q1's sales expense ratio was 18.19%, up 3.75pct year on year, mainly due to increased marketing and promotion efforts, increased sales staff remuneration and advertising expenses; management expense ratio was 10.46%, up 1.22pct year on year; financial expense ratio was -12.23%, down 4.03pct year on year, mainly due to increased interest income from bank deposits; the R&D expense ratio was 48.80%. The increase of 2.79 pct year on year was mainly due to the company continuing to increase research and development of artificial intelligence technology applications, especially large models Investment in research and development has increased in fields such as the introduction of high-end talents and computing power.
5) In terms of cash flow, the net cash flow from 2024Q1's operating activities was -50 billion yuan, a year-on-year decrease of 166.83%. This was mainly due to sharp fluctuations in the capital market during the reporting period, a decrease in users' demand for financial information, which led to a decrease in sales receipts, and an increase in remuneration paid to employees, R&D investment, etc.
6) In terms of contract liabilities, 2024Q1's contract debt was 1,116 billion yuan, an increase of 4.1% over the previous year.
2024Q1 continues to increase investment in R&D. AI applications can be expected to continue to increase R&D investment in 2024Q1, further increasing research on key technologies such as machine learning, natural language processing, intelligent speech, graphic image recognition and processing, and digital humans. In particular, it will increase the integration of technologies related to the big artificial intelligence model with the company's existing products and service systems to provide users with better products and service quality, and further enhance the competitiveness of the company's products. During the reporting period, the company added 21 new software copyright registrations for big data, artificial intelligence, etc., and 18 new invention patents were granted (including 1 US patent).
Earlier, on January 12, 2024, the company officially released the big model, Wanchai HiThinkGPT. This is the first major financial dialogue model in the industry to be registered through the Internet Information Office. The HiThinkGPT model is a pre-trained financial document that reaches the trillion level of tokens, covering various aspects of data such as stocks, bonds, futures, foreign exchange, commodity prices, macroeconomic indicators, and industry data. The model excels in the financial scene and can pass professional tests in various financial fields with high scores. In the future, the company will accelerate the integration of existing artificial intelligence product business with large models, and carry out applications in fields such as big model+financial investment, intelligent customer service, intelligent investment research, code generation, legal consulting, office assistants, translation, etc., to further enhance user experience and enhance product competitiveness. The company is expected to further increase the paid conversion rate and ARPU value with the power of AI.
Investment advice
We expect the company to achieve revenue of 40.2/45.9/52.1 billion in 2024-2026 (40.2/45.9 billion in 2024/2025, respectively), up 13%/14% year on year (previous value: 13%/14%, respectively); achieve net profit to mother 15.7/18.2/20.1 (previous value: 15.7/18.3 in 2024/2025, respectively) billion yuan, up 12%/16%/14% year on year (previous value 2024/2025, respectively) 12%/16%, respectively), maintaining a “buy” rating.
Risk warning
1) Risk of capital market fluctuations; 2) Large model development falls short of expectations 3) Institutional business development falls short of expectations.