Incident: 2024Q1 achieved revenue of 1,208 billion yuan, yoy -0.80%, qoq -2.15%; net profit to mother of 187 million yuan, yoy -188.38%, qoq -120.15%; net profit after deducting non-return to mother - 194 million yuan, yoy -216.81%, and qoq -150.25%, which is in line with our expectations.
Investment business fluctuations compounded AI investment, putting pressure on Q1 results. 2024Q1's operating performance was steady, with revenue of 1,208 billion yuan, which was basically the same as the previous year. Among them, Opera achieved revenue of US$102 million, yoy +17.02%, qoq -9.85%, and net profit of US$15 million. At the same time, Opera raised its full-year performance guidelines and is expected to achieve revenue of US$454-465 million in 2024 (previously US$450-465 million), which predicts a 16% increase over 2023. The adjusted EBITDA of 1.06 to 1.10 million Billions of dollars. However, due to fluctuations in investment business and increased AI investment, 2024Q1's net profit declined significantly year-on-year. Among them: 1) 2024Q1's investment income+ fair value change income was -129 million yuan, compared to the same period last year and 2023Q4 respectively, that is, the absolute value decreased by 220 million yuan and 1,575 million yuan compared to the same period last year; 2) The company launched AIGC business, and corresponding employee remuneration, technical service fees and server discounts increased significantly year-on-year. 2024Q1 349 million yuan, yoy +104.37%, qoq +0.41%, the absolute value increased 1.78 billion yuan, month-on-month. (Note: No special notes, the currency unit is RMB)? Increase investment in AI and place equal emphasis on talent and servers. The company implements the “All in AGI and AIGC” development strategy and continues to increase AI talent and server reserves. In terms of talent, by the end of 2023, the number of R&D personnel in the company reached 1,508, an increase of 19.12% over the 1,266 at the end of 2022. At the same time, the R&D team had more than 300 people with master's degree or above. In terms of servers, as of 2024Q1, the company's fixed assets were 394 million yuan, an increase of 334 million yuan and 134 million yuan over the same period, and usage rights assets were 472 million yuan, an increase of 343 million yuan and 150 million yuan over the same period last year, mainly due to the purchase and rental of servers.
Diversified AI business matrices continue to be implemented, and we are optimistic about the company's AI leadership. The company has built multiple matrices such as AI big models, AI search, AI music, AI video, AI social networking, and AI games. 1) The AI big model “Tiangong” was iterated to version 3.0 on 2024/4/17, and is currently one of the open source MoE models with the largest model parameters and the strongest performance in the world; 2) The AI search function continues to improve, covering the needs of various fields such as search, creation, and entertainment; 3) AI music model “Tiangong SkyMusic” was released on 2024/4/17; 4) AI social networking products Linky has been launched overseas; 5) The AI game “Club Koala” began testing on 2024/4/18. In addition, the company is also actively developing AI videos, AI comics, etc., and looks forward to continued breakthroughs and implementation of the company's AI models and applications.
Profit forecast and investment rating: Considering fluctuations in the company's short-term investment business, we lowered our previous profit forecast. We expect EPS to be 0.56/0.63/0.72 yuan for 2024-2026 (previously 0.70/0.82/0.88 yuan), corresponding to the current stock price PE 71/63/56X, respectively. The company's forward-looking AI layout. We are optimistic that the company's leading AI advantage will continue to be highlighted, and that diversified layouts will continue to be implemented, which is expected to open up room for growth and maintain a “buy” rating.
Risk warning: AI models and applications fall short of expectations, operational business falls short of expectations, industry regulatory risks.