Covered for the first time, a “gain” rating is given. We expect the company's 2024-2026 revenue to be $45.76, 60.05, and $7.706 billion, respectively. According to the comparable company's 2024 average PS valuation level of 15.16 times PS, the PS will be given a self-rated price of HK$2.25 (HK$1 = $0.92 using the exchange rate), giving it an “increase in holdings” rating.

Shangtang Technology is a leading AI company in China, making comprehensive efforts in the field of generative AI. With the mission of “adhering to originality, let AI lead human progress”, the company continues to lead cutting-edge research on artificial intelligence. In line with evolving trends in technology and demand, the company will fully adjust its business focus to the field of generative AI in 2023. In the “2023 China AI Development Platform Market Report” released by Sullivan and Toubao Research Institute, Shangtang Technology ranked first among domestic manufacturers in the two dimensions of growth index and innovation index, reflecting its dominant position in the industry.

Demand for generative AI is being released rapidly, and there is plenty of room for long-term growth. Generative AI is a key technology moving towards automation. It can have a positive impact on general productivity, business-specific functions, or industry-specific tasks, and is currently the focus of attention in all walks of life. According to IDC's latest report, the global and Chinese generative AI markets will reach 150 billion US dollars and 13 billion US dollars respectively in 2027, and the compound annual growth rates of 85.7% and 86.2% respectively in 2027 will become a new important growth point for the AI industry.

Shangtang Technology has a forward-looking layout from computing power infrastructure to large model implementation capabilities. Demand for AI terminals and multi-modal large models is expected to drive business growth beyond expectations. The company has forwardly built a leading domestic AI computing power facility - SenseCore, which can support the full life cycle production of large models with trillion parameters: the “Japanese and New” large models are quickly selected, and the performance is comparable to mainstream overseas models such as GPT4-Turbo: At the same time, the company pioneered the construction of industry-leading small models that can be used in laptops, smartphones, etc., and promoted the maturity of the Wenshengtu Big Model and Wensheng Video Big Model. The release of demand for AI terminals and multi-modal large models is expected to drive the company's business growth beyond expectations.

Risk warning: risk of failure in multi-modal large model development, risk of tight supply of core components, risk of increased market competition.