Incidents:
On April 26, 2024, the company released its 2024Q1 financial report: 2024Q1, the company achieved operating income of 382 million yuan (YoY +11.05%); net profit to mother of 77 million yuan (YoY +57.92%); deducted non-net profit of 73 million yuan (YoY +57.03%).
Key points of investment:
Overall performance: The company's overall revenue grew steadily in 2024Q1, mainly driven by steady growth in China's manufacturing network business and commercialization of AI products; strong profit side growth, mainly benefiting from a year-on-year increase in the company's gross margin and a sharp decline in sales rates. The 2024Q1 sales expenses rate decreased 3.9 pct year on year.
China Manufacturing Network membership is growing steadily, and commercialization of AI products continues to advance: as of 2024Q1, the number of paid members on the China Manufacturing Network platform was 25,018, an increase of 432 over the end of 2023. The total number of members who purchased AI Michael was 4,641 (excluding customers with trial experience packages), with a penetration rate of over 18%. In 2023, after many rounds of upgrades, AI Michael already has multi-dimensional product service capabilities. It can cover the entire foreign trade process through intelligent product launch, intelligent content generation, AI-assisted business opportunity follow-up, and AI-assisted customer development. In 2024, the company will focus on expanding AI application scenarios, combining AI solutions with the “X business” and full-link services of the Chinese manufacturing network, including linking with existing cooperative enterprises such as leading cloud website building services and foreign trade customer management software, to deeply integrate AI solutions into customers' foreign trade business processes. As one of the targets of AI+ cross-border e-commerce and multi-modal applications, the company continues to iterate AI products and is expected to gradually penetrate the platform's existing paid members+attract new members in the long term, driving up payment rates and ARPU values.
Profit forecast and investment rating: Considering that the commercialization of the company's AI products continues to advance and the overall cost reduction and efficiency effect is remarkable, we have adjusted the profit forecast. We expect the company's 2024-2026 operating income to be 17.9/20.8/2.34 billion yuan, net profit to mother of 485/5.85/682 million yuan, corresponding diluted EPS of 1.53/1.85/2.15 yuan, corresponding P/E is 21/18/15 times, maintaining the “buy” rating.
Risk warning: Artificial intelligence development falls short of expectations, risks such as AIGC development falling short of expectations, technological development falling short of expectations, commercial expansion falling short of expectations, intensifying industry competition, and uncertainty in Sino-US technology competition.