Incident: The company announced its annual report for the year 20223 and the quarterly report for 2024. In 2023, the company achieved revenue of 781 million yuan, +11.94% year on year, net profit to mother of 146 million yuan, +48.14% year on year, net profit excluding non-return to mother of 109 million yuan, +12.22% year over year. 2023Q4, the company achieved revenue of 207 million yuan, +21.66% year on year, net profit to mother of 0.23 million yuan, +27.63% year on year, net profit without return to mother of 35 million yuan, +110.02% year on year. 2024Q1, the company achieved revenue of 175 million yuan, +32.35% year-on-year, net profit of 16 million yuan, -71.98% year-on-year, and net profit of 16 million yuan after deducting non-attributable net profit of 0.16 million yuan, +88.35% year-on-year.

Focus on the core business, and the audio, video & e-commerce business is developing rapidly. The company's main business grew steadily in 2023. Major KA customers such as the government and central media continued to maintain high stickiness, while strengthening the construction of the audio and video e-commerce platform VJShi.com (VJShi.com) and the photo e-commerce website veer.com to meet the diverse needs of SME users for content. In 2023, e-commerce platform transaction sales increased from 1% in 2022 to 23% in 2023; audio and video business sales increased from 6% in 2022 to 26% in 2023, and SMEs and C-side market share further increased.

The “AI+content+scenario” strategy continues to advance, empowering the development of the main business. We believe that the company's subsequent growth is driven by the following aspects: 1) Large models pay for high-quality copyright data resources.

The company has scarce images, video, audio, and 3D structured data targets. It has a total of 3 million structured labels and industry knowledge maps, while ensuring that the content generated by the model is safe and compliant, can be used commercially, and does not pass on risk to customers; 2) AI empowers the entire business and brings great flexibility.

The company has completed the development of visual China's multi-modal generation and large model for understanding the industry. AI intelligent search and AI image editing tools have been launched on the company's websites VCG.com, veer.com, and VJShi.com to improve the monetization efficiency of the company's existing content; on the other hand, it is actively developing strategic cooperation with major model manufacturers such as Baidu Wenxin and Huawei Pangu, which is expected to bring additional growth.

3) Promote the construction of a digital asset management platform. In 2023, the company will provide visual digital asset management platform solutions for party, government, and media industry customers such as China News Agency and Shanghai Radio and Television. Benchmark customers are expected to expand more customers after the launch.

Investment advice: In 2024-2026, we expect the company to achieve operating income of 9.19/10.45/1,180 million yuan, or +17.64%/+13.80%/+12.90% year-on-year, and achieve net profit of 1.88/2.22/ 257 million yuan, +29.11%/+18.31%/+15.55% year-on-year, corresponding PE is 52.22X/44.13X/38.20X, maintaining the “buy” rating.

Risk warning: AI technology progress falls short of expectations, industry competition intensifies, and macroeconomic environment downside risks