The company's recent situation
On May 23, ArcSoft announced the official launch of the AIGC TuSen video function on the PhotoStudio AI intelligent commercial platform, which aims to enable enterprises and merchants to display their products. On the 24th, we participated in the “Using Technology to Drive Life and Explore the Path of Infinite Innovation” offline exchange meeting and investor reception day event. At the meeting, the company's management exchanged views with investors on the Tucson video function and the company's recent situation.
reviews
Based on the accumulation of AI technology, we believe that ArcSoft has technical advantages in controllable AIGC. The ArcSoft Tusheng video function is based on its own large visual model and the ArcMuse computing technology engine, and can achieve controlled video content generation, and has the advantages of “maintaining model face consistency”, “high-precision image recognition and processing”, and “rapid generation”. Compared to creative entertainment video generation products, we believe that video generation in the commercial field needs to ensure the consistency of clothing, brands, and models, emphasizes “conditions and constraints” on the basis of generation, and has more technical requirements. ArcSoft has accumulated deep AI algorithms in the mobile computational photography business, and we believe it can help the company create a differentiated advantage in details.
The cooperative ecosystem is gradually expanding, and the prospects for commercialization of the smart commercial auction business are promising. Since May, Hongsoft has successively reached cooperation with Alibaba Qianniu, 1688, and Doudian Microapps. Merchants on corresponding platforms can access Hongsoft PSAI services in the form of an API. At the press conference, the company stated that it is expected to continue to cooperate with platforms such as JD and TikTok in the future, and that its ecological partners will continue to expand. We believe that smart commercial products can be expected to solve the pain points of complicated and expensive traditional commercial production processes (for example, ArcSoft indicates that video costs 100-500 yuan/strip) and high equipment requirements, and the penetration rate can be expected to increase in the future. On the To C side, the company mentioned that it is developing a “rainbow suit” app. Consumers can try on the app in advance to experience the effects before purchasing clothing. We believe that in the future, it is also expected to be monetized through drainage and advertising.
The company's various businesses are progressing steadily. 1) In the mobile phone business, the company continues to expand new functions such as sports capture, portrait capture, telephoto capture, ultra-high resolution, etc., which we believe is expected to increase the value and customer penetration rate of stand-alone devices. 2) Automobile business, according to advanced engineering data, in the 1Q24 domestic cockpit vision solution algorithm market, ArcSoft ranked first with a market share of more than 30%. We believe that the company's competitiveness in the cabin is already in a leading position. In the future, the company will continue to work outside the cabin (Westlake and Eastlake products have already been deployed) and overseas (Tahoe and VisDrive have all been designated overseas), and the automobile business is expected to maintain a rapid growth trend.
Profit forecasting and valuation
We maintain our 2024-25 revenue and profit forecasts unchanged. The current stock price corresponds to 14,12 times P/S for 2024-25. We maintain our outperforming industry rating and target price of 31.8 yuan. The target price is 15 or 12 times P/S for 2024-25, and there is still 6.6% room to rise from the current stock price.
risks
Demand for consumer electronics fell short of expectations, and the smart driving and smart commercial sales business fell short of expectations.