Key points of investment

Steady growth in performance, continued to increase investment in R&D

There has been steady growth in performance. 2024Q1 achieved revenue of 424 million yuan, a year-on-year increase of 10.64%, net profit to mother of 84 million yuan, an increase of 38.10% year-on-year, and net profit after deducting non-return to mother of 70 million yuan, an increase of 25.23% over the previous year.

The gross margin of the 2024Q1 business was 40.95%. Compared with the same period last year, the gross margin increased significantly by 1.89 pcts.

The management/sales/R&D expense ratio was 3.23%/1.56%/19.12%. The management expense ratio was the same as the same period last year. The sales expense ratio decreased by 0.87 pcts year on year, and the R&D cost ratio increased by 3.68 pcts. The company continued to increase investment in R&D projects.

The shareholding of the Social Security Fund increased. Land Stock Connect became the top ten shareholders. In 2024Q1, there were changes in the number of shares held by 5 shareholders, and 1 new shareholder became the top ten shareholder. Among them, the number of shares held by the National Social Security Fund 104 Group increased, increasing its holdings by 1.3443 million shares, and the number of shares held after the increase was 3.1508 million shares. Hong Kong Central Clearing Limited (Land Stock Connect) is one of the top ten new shareholders, holding 3.414,900 shares.

Officially signed a contract with Huawei to actively lay out the Hongmeng ecosystem

On April 18, at the Hongmeng Native App Cooperation and Exchange Promotion Conference, the company officially signed a contract with Huawei and reached a Hongmeng cooperation.

The company has built a complete Hongmeng App development integration framework covering multiple dimensions such as development, testing, operation and maintenance, operation, and monitoring to ensure the stability of the mobile technology architecture. On the case side, the company helped the customer develop a variety of Hongmeng mobile apps, such as the Hongmeng System 2.0 native application for a provincial mobile phone business office, the Hongmeng version application for a music car, and the Hongmeng app for a person's email.

As a staunch supporter and important partner of Huawei's Hongmeng ecosystem, the company will continue to increase technical investment in the Hongmeng ecosystem and work with Huawei to promote the prosperity and development of the Hongmeng ecosystem.

Profit forecasting and valuation

The company's revenue for 2024-2026 is estimated to be RMB 1,848, 22.87 and RMB 2,828 million, net profit to mother of RMB 3.68, 4.41, 540 million yuan, and EPS of RMB 0.82, 0.98, and 1.21 yuan/share, maintaining a “buy” rating.

Risk warning

Market competition risks, AI product implementation falling short of expectations, rising labor costs, and risk of brain loss.