Matters:

The company's revenue for the full year of 2023 was 491 million yuan, up 31.72% year on year; net profit due to mother was -288 million yuan, down 6.23% year on year; the company's net profit deducted from non-mother for the year was 335 million yuan, down 7.88% year on year.

Q1 revenue in 2024 was 63 million yuan, up 46% year on year; net profit due to mother was -89 million yuan, down 3.77% year on year; the company's Q1 net profit without return to mother was -93 million yuan, up 4.57% year on year.

Commentary:

The company's revenue has increased significantly, and its profitability has steadily increased. In 2023, the company will actively respond to the new opportunities brought by artificial intelligence represented by ChatGPT, adapt to industry trends and meet the actual needs of users, continue to improve quality and efficiency, and push the company's overall performance back to the fast track of growth. The company's revenue for the full year of 2023 was 491 million yuan, up 31.72% year on year; net profit due to mother was -288 million yuan, down 6.23% year on year; net profit deducted from non-mother for the whole year was 335 million yuan, down 7.88% year on year. In 2023, the company's gross margin and net margin level increased steadily. The gross margin in 2023 was 59.61%, up 3.07pp year on year, and net margin was -58.92%, up 14.14pp year on year. The company's Q1 revenue in 2024 was 63 million yuan, up 46% year on year; net profit to mother was -89 million yuan, down 3.77% year on year; net profit after deducting non-return to mother was -93 million yuan, up 4.57% year on year. The company's gross margin for the first quarter of 2024 was 69.27%, up 17.7pp year on year, and net margin was -141.67%, up 57.61pp year on year.

The revenue of the company's three major products has achieved significant growth, and the profitability of the core business has improved. By product, in 2023, the company's software products and technical services, applications and solutions, and software and hardware integrated products and services achieved revenue of 390 million yuan, 79 million yuan, and 121 million yuan respectively, with year-on-year increases of 30.80%, 29.33%, and 61.28%, respectively. Among them, the company's main source of profit is software products and technical services. The business is mainly carried out through product licensing. Software product licensing and supporting services and software product licensing business achieved revenue of 184 million yuan and 132 million yuan respectively, up 92.13% and 19.70% year-on-year respectively. In 2023, the gross margins of the company's software products and technical services, applications and solutions, software and hardware integrated products and services were 70.99%, 7.30%, and 46.47%, respectively. Among them, gross margins of software products and technical services and applications and solutions increased by 3.24 pp and 3.46 pp, respectively, and gross margins of integrated software and hardware products and services decreased by 1.02 pp year on year.

The company is in a period of rapid growth and continues to increase sales and R&D expenses. In 2023, the company's sales expenses, management expenses, and R&D expenses were 2.63 billion yuan, and the sales cost rate/management cost ratio/R&D expenses ratio were 53.56%/25.66%/45.42%, respectively. Sales expenses and R&D expenses accounted for relatively high sales expenses and R&D expenses. On the sales side, in 2023, the company further strengthened and expanded its sales force to develop markets, find customers and cultivate the industry in related vertical industries, leading to high sales expenses, which increased 27.94% year over year. In terms of R&D, the company continues to improve and optimize the three basic software products, further enhance the maturity and competitiveness of the products, and continue to increase investment in R&D expenses, increasing 15% over the previous year. Currently, the company is actively cooperating with Intel to jointly release AIGC vector database solutions and jointly build a big data/artificial intelligence laboratory.

Investment advice: Currently, the company is in a period of rapid growth, and the revenue of the three major products has achieved significant growth. Considering changes in the macro environment, the company's 2024-2026 revenue is expected to be 6.87, 9.63, and 1,321 billion yuan (previous values 2024 and 2025 were 6.97 million yuan and 975 million yuan, respectively); the company's net profit for 2024-2026 is expected to be -1.4, 0.05, and 180 million yuan respectively (previous values 2024 and 2025 were- 1.83 billion, 0.16 million yuan). Referring to comparable company valuations, the company was given 10xPS in 2024, corresponding to a target price of 57 yuan, maintaining a “recommended” rating.

Risk warning: the company is not yet at profit risk; changes in the macro environment; industry competition intensifies