The company announced the 2023 annual report and the 2024 quarterly report: the company achieved revenue of 2.143 billion yuan in 23, a year-on-year decrease of 7.04%, and realized net profit of 217 million yuan, a year-on-year decrease of 17.20%; in 24Q1, revenue of 481 yuan, an increase of 1.66% over the previous year, and realized net profit of 50 million yuan, an increase of 21.23% over the previous year. The company plans to distribute a cash dividend of 1.1 yuan (tax included) for every 10 shares.
Incident comments
Changes in settlement methods such as Ali affect apparent revenue. Leading customers such as Ali changed from the full amount method to the net amount method, which affected the company's e-commerce industry revenue decline by 54.27% in '23. Excluding changes in caliber, it is expected that revenue will increase. Recently, the company and SHEIN co-hosted the first POD fully managed investment promotion event in Xi'an, which is expected to help sellers from dominant industries to accelerate their entry into the SHEIN platform and gain room for long-term development.
Exchange gains and losses, equity incentives, and credit impairment losses affect apparent profit. The decrease in exchange earnings and the impact of equity incentive share payments led to a year-on-year decline in apparent net profit. Excluding the impact of exchange gains and losses and equity incentives, net profit attributable to mother was 212 million yuan/ +8.99% and 164 million yuan/ +38.75% in '23 and 24Q1, respectively. Net exchange earnings of nearly 8,000 w were achieved in '22 due to the rapid appreciation of the US dollar, while in '23 it was only 1,173 watts; in addition to exchange gains and loss and equity incentive expenses, 23Q4's special deduction and impairment preparations for McKelley also dragged down the company's profits.
Improve the AI product matrix and continue to empower AI technology. The company pioneered the integration of large-scale models at home and abroad, including GPT-4, Stable Diffusion, Midjourney, Wenxin Yiyan, and Tongyi Qianwen. Based on the AI transformation of the full-link marketing business scenario layout, the company helped e-commerce customers achieve an increase of more than 35% in advertising CTR click rates, a 45% reduction in the cost of a single click, and a monthly advertising effectiveness KPI completion rate of 123%. Since the launch of the AI Kreado platform in July 2023, users have covered 203 countries around the world, with more than 1 million registered users and monthly user visits; immediately after the release of multiple modes such as Sora, the company launched data analysis and growth model products based on self-developed models — digital eye intelligence, and intelligent multi-cloud management platform Gears — to continuously innovate and empower advertisers.
The company clarified the new strategy of “leading the new wave of brands going overseas with AIGC”. The company has helped more than 5,000 Chinese enterprises expand overseas markets and help enterprises to localize. On the advertiser side, the company provides overseas solutions for brand customers such as Voice, Infinix Note, Lego Co., Ltd., and Cudi Coffee. At the same time, ZMatiCoo, an AI-driven programmatic advertising platform launched by the company in '22, provides an ad defense system for traffic owners to help customers significantly increase ad monetization. In the field of skit going overseas, the company helped apps such as ReelShort and Dreame expand overseas markets in '23.
The company is deeply involved in global intelligent marketing and uses AIGC to enable self-developed intelligent business systems to improve the efficiency of effective advertising. We expect the company to achieve net profit attributable to the parent company of 268/350 million in 24-25, respectively, and 29/22 times the corresponding PE, respectively, to maintain a “buy” rating.
Risk warning
1. The development of AI technology falls short of the expected risk;
2. Risk of international trade friction and changes in the international situation