Cost-side optimization is obvious, and profits exceed expectations

The company released 24Q1 results, achieving operating income of 382 million yuan, an increase of 11.05% over the previous year; achieved net profit of 77 million yuan, an increase of 57.92% over the previous year; and realized net profit after deduction of 73 million yuan, an increase of 57.03% over the previous year. Among them, cost-side optimization was obvious. The improvement in the sales expense ratio exceeded expectations, down 3.83 pct to 36.47% year on year, and R&D cost rate decreased 0.3 pct to 12.38% year on year.

AI is continuously iterating, and I am optimistic that the payment penetration rate will increase

The number of paid members of AI Michael reached 4,613 in the first quarter, a quarterly increase of nearly 20% over the previous quarter of 4,000 at the end of 2023, and the paid penetration rate reached 18.6%. At the beginning of February, AI Michael announced another update and iteration, introducing three functions: video generation, intelligent layout, and industry intelligence. Through deep integration of AI technology, the work efficiency of foreign traders was greatly improved. Previously, AI Mac might be enough to intelligently replace image backgrounds and automatically generate product posters based on foreign trade companies' material images and usage scenario descriptions. With this upgrade, AI Mac introduced a new video generation function for the first time in the industry, which is also the biggest highlight of this product iteration. As product power continues to be iterated, the paid penetration rate is expected to increase at an accelerated pace, while focusing on AI product iterations and the possibility of incorporating AI functions into basic service packages to increase prices.

The Super Outing Season got off to a good start, and the number of members grew steadily

The number of members of the Made in China Network in the first quarter was 25,018, an increase of 432 over the previous quarter. On April 1, the Made in China Network 2024 Super Outing Season was officially launched, and the first day of the event had a good start.

According to platform data, the number of visits on the first day of the event increased by 163%, the number of buyers increased by 183%, and the number of business opportunities increased by 41%; among them, the number of business opportunities on the buyer app increased by 51%, breaking the platform's single-day business opportunity growth record.

The “Super Sailing Season” and “Golden Autumn Harvest Fair” are annual platform-level comprehensive exhibition activities at MIC International. Each year, they are held during the peak procurement season in spring and autumn. During the event, the platform uses various “online” + “offline” drainage forms through an omnichannel and multi-dimensional linkage promotion mechanism to make every effort to expand traffic and promote business opportunities. In this super overseas season, China Manufacturing Network has set up customized product pavilions, retail and wholesale stores, brand distribution halls, industry quality products, one-click express delivery centers, and trading discount centers based on the needs and preferences of overseas buyers and venues with good feedback from previous events. This year, the platform also closely followed global procurement trends and set up 3 new tracks for the event: New Energy, Intermediate Goods, and Short Video to help Chinese suppliers seize market opportunities during the peak foreign trade season.

Investment advice

We are optimistic about the company's ability to continue to reduce costs and increase efficiency with the power of AI, as well as the increase in the payment penetration rate of the AI business. We expect the company to achieve operating income of 1.81 billion yuan/2.27 billion yuan/2.26 billion yuan in 2024-2026 (previous value 1.77 billion yuan/2,150 billion yuan/2,507 billion yuan); the company is expected to achieve net profit of 466 million/566 million/641 million yuan in 2024-2026 (previous value of 465/588 million/693 million yuan), maintaining the “buy” rating.

Risk warning

Macroeconomic pressure continues; delivery of AI products is delayed; user payments fall short of expectations; industry competition intensifies.