Event: The company released its 2023 annual report and 2024 quarterly report. Throughout 2023, the company achieved operating income of 271 million yuan, a year-on-year decrease of 21.92%; net profit to mother was 9.6639 million yuan, reversing the year-on-year loss.
In Q1 2024, the company achieved operating income of 50,1381 million yuan, a year-on-year increase of 3.68%; net profit to mother was 9.1983 million yuan, a year-on-year loss reduction of 14.95%.
The transformation and upgrading of digital intelligence has been completed, and gross margin has increased significantly. The company has now achieved digital transformation and upgrading of traditional businesses and healthy development of new businesses. The company optimized and adjusted its business structure and stopped developing fiscal and taxation service business in the corporate service business with large operating income but low gross margin. Gross profit margins have increased significantly. The company's overall gross margin for the full year of 2023 increased by 26.76pct year-on-year to 55.11%.
New AI business empowers thousands of industries. The company will launch a new artificial intelligence service business in 2023. Among them, in terms of artificial intelligence training, the company and its subsidiaries cooperate with companies such as Alibaba DAMO Academy, HUAWEI CLOUD, and Unicom Industrial Internet to develop multiple training products for different customer groups of founders, AI technicians, and university students to deliver AI talents to all walks of life. In 2023, the company's artificial intelligence training business achieved revenue of 1,1102 million yuan, with a gross margin of 74%.
Partnering with HUAWEI CLOUD to serve large model solutions for small and medium enterprises. According to the official account of Entrepreneurship Dark Horse, on January 16, Entrepreneurship Dark Horse joined hands with HUAWEI CLOUD. The two sides integrated “computing power+model+service”, signed a comprehensive cooperation agreement and released the “SME Service Big Model Solution” with the goal of accelerating the digital upgrading of China's tens of millions of small and medium-sized enterprises, and reached a comprehensive partnership to jointly promote the high-quality development of small and medium-sized enterprises. In mid-November 2023, Entrepreneurship Dark Horse released a large model for small and medium-sized enterprises, focusing on the government and enterprise intelligent service market, deeply linking the government, state-owned enterprises, and leading industrial enterprises, creating a benchmark model for intelligent upgrading of regional industries, building an AI service ecosystem, introducing it to the local community, and being deeply applied to grass-roots governments and small and medium-sized enterprises. We believe that cooperation between the two sides is conducive to resource sharing, capacity building and market expansion, accelerates the application of digital intelligence productivity in all walks of life, and provides strong support for the digital upgrading of small and medium-sized enterprises.
Investment advice: As a well-known service and incubation agency for small and medium-sized enterprises in the industry, the company actively shrinks low-profit businesses through strategic transformation, and its overall profitability has improved significantly. Increased gross margin propelled the company to achieve results and reverse losses in 2023. The company fully embraces AI and continues to enrich its layout in the AI field with partners such as HUAWEI CLOUD to create an AI ecosystem with computing power+algorithms+services to better empower small and medium-sized enterprises in all walks of life. We are optimistic about the company's development and forecast that the company will achieve revenue of 379 million yuan, 524 million yuan, and 707 million yuan in 2024-2026; net profit to mother of 80 million yuan, 101 million yuan, and 124 million yuan; EPS of 0.48, 0.61, 0.74 yuan, PE 45X, 35X, 29X, and maintain an “increase” rating.
Risk warning: industry competition intensifies; technology transformation falls short of expectations; big model technology development falls short of expectations; industry policy changes.