Revenue increased dramatically, and changes in revenue structure led to a decline in gross margin. 1) The full year of 2023 achieved revenue of 52,616 billion yuan, a year-on-year increase of 43%; achieved net profit of 117 million yuan and a significant loss over the previous year; net profit after deducting non-return to mother of 150 million yuan, up 107.91% year on year; corresponding to comprehensive dilution of EPS of 0.05 yuan, in line with the performance forecast range (performance forecast annual profit of 100-150 million yuan); achieved net cash flow from operating activities of 633 million yuan; 2) The company achieved operating income of 15.782 billion yuan in the first quarter of '24 Net profit to the mother was 82 million yuan, up 61.5% and -44.6%, respectively, corresponding to the overall dilution of EPS of 0.03 yuan; the decline in Q1 net profit was mainly affected by factors such as cost amortization and falling gross margin; 3) Affected by the increase in the share of overseas business, gross margin fell 1.25 pcts to 3.4% year-on-year for the whole year, and fell 2.0 percentage points year-on-year to 2.9% in Q1 in '24.
Revenue from the overseas business grew rapidly. 1) In 2023, the company's overseas business achieved revenue of 37.363 billion yuan, accounting for 71% of revenue, a year-on-year increase of 42%; 2) The company's advertising revenue growth rate remained in double digits, and the advertising revenue growth rate of agents for TikTok For Business was nearly 50%; the company's performance developed rapidly after starting official agency cooperation with Microsoft Advertising and Pinterest in 2023, showing exponential growth. At the same time, in-depth discussions were also held with Microsoft to explore the direction of cooperation in the field of AI for overseas industry solutions. As the flagship product of the Blue Label Overseas, the “Luban Cross Border Pass” has broken through the 1 billion yuan mark in annual revenue.
AI-driven revenue is expected to continue to increase dramatically, and the AI and metaverse sector is leading the layout. 1) The 23-year company “created nearly 300 real AI marketing cases, and AI-driven revenue reached 108 million. In 2024, it is expected to grow by about 5-10 billion yuan, achieving an increase of about 10 times; 2) In 2023, BlueAI collaborated with Baidu, Smart Spectrum, Microsoft China, Google and other cloud platforms to release the BlueAI 1.0 industry model, which now serves key customer projects such as overseas and domestic integrated marketing, content marketing, and advertising. In 2024, BlueAI will evolve into a multi-modal, multi-scenario AI Agent (AI Agent), further improving the level of AI transformation of organizations and businesses.
Risk warning: technology falling short of expectations; macroeconomic fluctuations; risk of impairment of goodwill, etc.
Investment advice: Optimistic about AIGC's potential to reduce costs and increase efficiency in the marketing service industry and the company's leading layout advantage, and maintain an “increase” rating; considering factors such as equity incentive expenses and gross margin of overseas business, we lowered our 24/25 net profit to 382/604 million yuan (previous value was 68/8.4 million yuan), adding a 26-year forecast of 748 million yuan, corresponding to diluted EPS = 0.15/0.24/0.30. The current stock price corresponds to PE = 39/25/20x. AIGC is expected to drive the marketing service industry to reduce costs and increase efficiency and create new business scenarios and models. The company has significant layout advantages in AI and other fields, continues to be optimistic about the possibility of second growth in the AIGC era, and maintains an “increase” rating.