Event: The company released the 2023 Annual Report & 2024 First Quarter Report. In 2023, the company achieved revenue of 5.24 billion yuan, a year-on-year increase of 25.9%; net profit to mother - 1,822 billion yuan, a year-on-year decrease of 152.4%; net profit after deducting non-return to mother - 1,887 billion yuan, a year-on-year decrease of 147.25%. Among them, Q4 achieved revenue of 1.904 billion yuan in a single quarter, an increase of 13.63% year on year; net profit to mother - 1,828 billion yuan, a year-on-year decrease of 146.71%. In the first quarter of 2024, the company achieved operating income of 1.1 billion yuan, a year-on-year increase of 6.27%; net profit to mother was 0.09 billion yuan, a year-on-year decrease of 19.73%; net profit after deducting non-return to mother was 0.2 billion yuan, a year-on-year decrease of 141.17%.

The cloud SMS business declined, and short-term performance was under pressure. The main factors that are putting pressure on the company's performance are 1) the slight decline in the volume of service information business in the cloud SMS business and increased competition in the industry, leading to a continuous decline in the gross margin of the cloud SMS business; 2) 5G messaging expansion and ecological cooperation for the new business have delayed progress compared to expectations due to improvements in cooperation models with operators; 3) the company's high expenses, and the gross margin of products such as video SMS has declined at the same time. The company's main business, the cloud communication service business, achieved revenue of 481 million yuan, accounting for 91.94% of total revenue, an increase of 23.8% over the previous year.

Among them, international business revenue was 606 million yuan, an increase of 181.49% over the previous year. Mainly companies carry out technological innovation and integration to actively expand the international market.

Profitability declined slightly, and share payments hampered cost control. The company's consolidated gross margin was 6.28%, a year-on-year decrease of 3.06pp. The gross margin of the cloud communication service business was 6.64%, down 3.17pp from the previous year. The main reason was that during the reporting period, the company had high expenses to promote construction and investment in new businesses. In 2023, the company's sales/management/financial expenses were 1.88/1.48/37 million yuan respectively, and the cost rates were 3.6%/2.82%/0.7%, respectively, -0.81pp/+1pp/+0.06pp compared to the previous year. The sharp increase in management expenses was mainly due to share payments during the reporting period; the increase in financial expenses was due to exchange gains and losses. In 2023, the company's R&D expenses were 106 million yuan, accounting for 2.02% of the company's revenue. The company continues to invest in R&D to promote the construction and innovation of new business platforms and new technologies.

The 5G messaging business is developing rapidly, consolidating its leading position in the industry. In the past two years, the company has successively selected Mobile Internet's “SMS Mini Program Partner”, signed a “5G Message Fallback Solution Technical Service Contract” with Telecom Cell, and signed an “Zhixin Technology Service Contract” with Unicom Online Information Technology Co., Ltd. The company cooperated with major terminal manufacturers such as Huawei, Xiaomi, Honor, OPPO, and VIVO to successfully support operators in building a 5G messaging platform covering more than 800 million terminals. The successful construction of the platform enabled DreamNet Technology to carry out deeper technical upgrades and business expansion in the 5G messaging market.

Extend the field of AI and promote technology integration and innovation. Using chatbot technology as a carrier, the company combined 5G technology and AI to develop a highly integrated 5G messaging platform. Intelligent enterprise SMS services such as AI mailboxes and AI messaging launched by the company can automatically classify and prioritize received messages to provide users with more personalized and intelligent information management, thereby improving the efficiency of user message processing.

Profit forecasting and investment advice. EPS is expected to be 0.49 yuan, 0.64 yuan, and 0.83 yuan respectively in 2024-2026, and revenue will maintain a compound growth rate of 28.6% over the next three years. Maintain a “hold” rating.

Risk warning: Risks such as fluctuating downstream customer demand, increased market competition, and falling short of expectations in fund-raising projects.