Event: Wanxing Technology released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved revenue of 1,481 billion yuan, +25.49% year-on-year; realized net profit of 86 million yuan, +113.20% year-on-year.
With 2024Q1, the company achieved operating income of 358 million yuan, +0.90% year-on-year; realized net profit of 0.26 million yuan, +22.99% year-on-year.
Profits increased in 23 years, and the scale effect gradually became prominent, driving the cost ratio down during the period. By product, in 2023, the company's video creative, utility, document creative, and graphic creative businesses achieved revenue of 9.61 million yuan, 2.56, 1.30, and 129 million yuan, respectively, of +28.91%/+10.07%/+30.92%/+30.52% year-on-year, respectively.
In 2023, the company's net interest rate reached 7.31% (YoY +1.86pct), and the sales, management and R&D expense ratios were 48.81% (YoY -0.34pct), 11.16% (YoY -0.63pct), and 27.18% (YoY -2.29pct); the total expenses generated by the company's equity incentive plan were RMB 12 million, and net profit after exclusion was RMB 98 million.
Under the 24Q1 high base, there was a slight increase in revenue and steady growth in profits. 2024Q1, the company continued to increase R&D investment, with R&D expenses of 104 million yuan, +9.77% year-on-year. On the software side, the focus is on the development and training of computer vision algorithms, music algorithms, and audio and video large-scale model technology to comprehensively innovate various AI atomic capabilities; in terms of hardware, the decoding speed of the CPU process is further optimized, the preview frame rate of the CPU process is increased, and the adaptation of Wanxing Meow Movie to the new MateBook X Pro smart PC product and NPU has been completed.
Wanxing's “Tianmu” is officially open beta. It is expected to inject new momentum into the video creative business after being deeply integrated into Filmora/Wanxing Meow Movie and other products. On April 28, Wanxing's “Tianmu”, the first major audio and video multimedia model in China, was officially tested. “Tianmu” relies on 1.5 billion user behavior data and 10 billion localized audio and video data training, and has been registered by the Central Internet Information Office. Wensheng Video can achieve consistency in different styles, rich scenes and themes, and supports the generation of videos over 60 seconds.
Investment advice: We expect the company's revenue for 2024-2026 to be 1,836 billion yuan, 22.83 billion yuan, and 2,880 million yuan, respectively, and net profit to mother of 1.22, 1.74, and 242 million yuan respectively. The company is a leading digital creative software in China, and AI empowerment is expected to bring about long-term performance growth elasticity and maintain a “buy” rating.
Risk warning: Product updates fall short of expectations; customer demand progress falls short of expectations; industry competition intensifies.