Incident Overview
Wanxing Technology released the 2023 Annual Report and the First Quarter 2024 Report on April 26, 2024. In 2023, the company achieved revenue of 1,481 billion yuan, a year-on-year increase of 25.49%; achieved net profit of 86 million yuan, an increase of 113.20% over the previous year; realized net profit of 90 million yuan without return to mother, an increase of 817.45% over the previous year.
2024Q1 achieved revenue of 358 million yuan, a year-on-year increase of 0.90%; realized net profit of 0.26 million yuan, an increase of 22.99%; and realized net profit without deduction of 0.23 million yuan, an increase of 26.59% over the previous year.
The video creative business accounted for 65%, and the document creative and graphic creative business grew by more than 30% 1) In terms of revenue, the company achieved revenue of 1,481 billion yuan in 2023, an increase of 25.49% over the previous year.
Looking at it by business,
The video creative business is the company's largest source of revenue. In 2023, it achieved revenue of 961 million yuan, an increase of 28.91% over the previous year, accounting for 64.87% of total revenue, and the overall subscription renewal rate increased by 5 percentage points;
The utility business achieved revenue of 256 million yuan, an increase of 10.07% over the previous year, accounting for 17.28% of total revenue;
The document creative business is the fastest growing business. In 2023, it achieved revenue of 130 million yuan, an increase of 30.92% over the previous year, accounting for 8.79% of total revenue;
The creative drawing business achieved revenue of 129 million yuan, an increase of 30.52% over the previous year, accounting for 8.71% of total revenue.
By region, in 2023, the company achieved revenue of 1,350 billion yuan, up 28.1% year on year, accounting for 91.19% of total revenue; domestic revenue (including Hong Kong, Macao and Taiwan regions) achieved revenue of 130 million yuan, up 3.6% year on year, accounting for 8.81% of total revenue.
2) In terms of profit, in 2023, the company achieved net profit of 86 million yuan, an increase of 113.20% over the previous year; 2024Q1 achieved net profit of 0.26 million yuan, an increase of 22.99% over the previous year.
3) In terms of gross margin, the company's gross margin in 2023 was 94.77%, down 0.7 pct year on year; in 2024Q1, the company's gross margin was 94.5%, down 1.21pct year on year.
4) In terms of cost ratio, the company's sales expense ratio in 2023 was 48.81%, down 0.34pct year on year; management expense ratio was 11.16%, down 0.63pct year on year; financial expense ratio was 0.21%, down 1.41pct year on year; R&D expense ratio was 27.18%, down 2.29pct year on year.
5) In terms of cash flow, the net cash flow from the company's operating activities in 2023 was 234 million yuan, an increase of 117.51% over the previous year, mainly due to the increase in cash due to the increase in operating income.
Continuing to expand technical cooperation partners at home and abroad to help build the AI ecosystem at the technical level. In 2023, the company signed a cooperation agreement with Microsoft to introduce OpenAI commercial services to implement large-scale model capabilities into multiple overseas products; signed a strategic cooperation agreement with HUAWEI CLOUD to actively deepen cooperation in the fields of cloud computing and artificial intelligence information technology; and signed a strategic cooperation agreement with Xiangjiang Laboratory to jointly build industry-academia research and use alliances based on AIGC, Web3.0, metaverse, etc., to jointly carry out innovative algorithms and industrialization work; A strategic partnership with iFLYTEK reached on the Spark Big Model plug-in ecosystem, and some products were added to the Spark Cognitive Big Model platform in the form of plug-ins to jointly promote the construction of the domestic AI Big Model ecosystem.
At the product level, the company carries out more dimensional exploration and cooperation with well-known enterprises in related technology and hardware in the fields of technological innovation, industrial application, and commercial cooperation. For example, during the reporting period, Yitu Software signed a Hongmeng Ecological Deepening Cooperation Agreement with Huawei, becoming one of Baidu Wenxin's first ecological partners; the company attended the 2023 Intel New Product Launch Conference as a partner of Intel's “AI PC Acceleration Program” to actively adapt to new servers from world-renowned hardware manufacturers; and 2024Q1 completed the adaptation of Wanxing Meowyeong to the new MateBook X Pro smart PC products and NPU.
The “Tianmu” model has been registered through the Internet Information Office. It is worth looking forward to the company's continued refinement and optimization of the video creation engine and increasing AIGC algorithm research and development in 2023 to further empower the company's product AI capabilities. On March 18, 2024, the company's audio and video multimedia model “Tianmu” officially passed the filing license for the “Interim Measures on the Management of Generative Artificial Intelligence Services” issued by seven departments including the State Internet Information Office and the Development and Reform Commission. At the same time, the company applied a series of algorithm capabilities to original products such as Wanxing Meowing/Filmora, Wanxing PDF/PDFelement, and EdrawMind, as well as new AIGC products such as Wanxing Broadcast/Virbo, TruMate, and Kwicut. Looking forward to the future, the company will match the capabilities of the large canopy model with user needs, and implement it in stages to enable the upgrading of the AI capabilities of the original product and the expansion of the new product business, and promote the continuous development of the company's business.
Investment advice
We expect the company to achieve revenue of 18.3/22.2/26.6 billion in 2024-2026 (19.6/25.5 billion in 2024/2025, respectively), with a year-on-year increase of 23%/21%/20% (previous value 2024/2025, respectively, 29%/30%); net profit to mother of 1.3/1.7/2.2 (previous value 1.5/2.1 billion in 2024/2025, respectively), with a year-on-year increase of 50%/33%/25% (previous value of 56 in 2024/2025, respectively) %/ 45%), maintaining a “buy” rating.
Risk warning
1) New product promotion falls short of expectations; 2) AIGC commercialization falls short of expectations; 3) SaaS transformation falls short of expectations; 4) Competition in the creative software market intensifies.