Incident: The company released its quarterly report for 2014, achieving revenue of 424 million yuan, a year-on-year increase of 10.64%, net profit to mother of 83.75 million yuan, an increase of 38.10% year-on-year, and net profit after deducting non-return to mother of 70.49 million yuan, an increase of 25.23% over the previous year.

Here are our reviews:

Profitability continues to improve, and sales, management, and financial expenses are properly controlled. Judging from gross sales margin and net sales margin, 24Q1's gross sales margin was 40.95%, up 1.89 percentage points from the previous year, and the net sales profit margin was 19.02%, up 3.10 percentage points from the previous year. Looking at various expense ratios, the 24Q1 company's sales expenses ratio was 1.56%, down 0.87 percentage points from the previous year, the management expense ratio was 3.23%, the same as the previous year, and the financial expenses ratio was -1.27%, down 0.14 percentage points from the previous year.

Continue to invest in R&D to build AI technology capabilities, focusing on digital people and AI+ application innovation. Companies continue to invest in research and development in AI capacity building, build MMS RiChai, and launch the AIBox AI AI engine. Through the ability to introduce general-purpose large models, technical components from many fields have been upgraded and integrated. MMS AIBox will be a bridge connecting general artificial intelligence with private domain application scenarios, supporting the implementation of multiple intelligent scenarios for future enterprise customers, and comprehensively and efficiently improving the level of enterprise intelligence. Furthermore, in addition to the capacity building of AI platforms, the company actively invests in digital people and AI+ application innovation, focusing on developing products such as next-generation smart mailboxes, smart cloud disks, and virtual digital humans. 24Q1 R&D expenses were 81.15 million yuan, accounting for 19.12% of revenue, an increase of 3.68 percentage points over the previous year.

A Hongmeng cooperation was signed with Huawei to promote the prosperity of the Hongmeng ecosystem. Recently, the Hongmeng Native Application Cooperation and Exchange Promotion Conference and the Huawei Developer Day (HDD) Shenzhen Station came to a successful conclusion. Caixun Co., Ltd. and Huawei officially signed a contract to reach a Hongmeng cooperation. Caixun Co., Ltd. focuses on the digital transformation circuit of enterprises and is committed to becoming a first-class intelligent digital expert. Caixun Co., Ltd. continues to actively deploy in the Hongmeng ecosystem. Currently, it has built a complete integrated framework for the development of the Hongmeng App, covering various dimensions such as development, testing, operation and maintenance, operation, and monitoring to ensure the stability of the mobile terminal technology architecture. In addition, in terms of security, security construction is guaranteed at multiple levels, such as application security, data security, and terminal security, to create a complete Hongmeng App client technology architecture system. At the same time, Caixun Co., Ltd. also has rich practical project experience and technical accumulation to help customers develop a variety of Hongmeng mobile apps, such as the Hongmeng System 2.0 native application for a mobile phone business office in a province, the Hongmeng version application for a music car, and the Hongmeng app for a certain personal email.

Profit forecasts and investment suggestions:

The company is deeply involved in the digital economy, actively embraces AIGC technology, and has strong R&D capabilities. Along with the development trends of the Xinchuang industry and state-owned clouds, the number of orders is expected to grow rapidly in the future. The company's net profit for 24-26 is estimated to be 3.40/4.32/541 million yuan, corresponding to PE of 25/20/16X, maintaining a “buy” rating.

Risk Warning: Increased industry competition, AI development falls short of expectations, Xinchuang development falls short of expectations, state-owned cloud development falls short of expectations, rising labor costs, and risk of brain loss