Actively adjust business to improve the quality of operations. In 2023, the company's total revenue was 10.82 billion yuan (-26.6% YoY), mainly due to fair changes in the value of the company's shares in order to improve the quality of operations and reduce operating risks; the marketing business sector actively adjusted its business strategy, reduced the low-profit business, and raised the customer entry threshold; gross profit margin of 6.3% (+2pct year over year); net profit after deducting non-mother of 130 million yuan (+80% year over year), net profit attributable to the mother of 190 million yuan (YoY +136.1%), of which the profit from the change in fair value of fair value of the shares involved in Doushen Education's bankruptcy and restructuring project was mainly due to fair changes in stock values involved in Doushen Education's bankruptcy and restructuring project; Net cash flow from operating activities was 370 million yuan, a year-on-year correction.
Continuously improve comprehensive marketing capabilities. In 2023, the company's brand marketing revenue was 3.04 billion yuan (+15.1% YoY); the performance marketing business was 7.78 billion yuan (-35.5% YoY). It firmly optimized the customer structure, reduced consumption business, and the gross margin increased significantly. In 2023, 1) The company actively expanded the industry and leading customers. The brand marketing obtained high-quality customers such as BYD, BAIC New Energy, Cyrus, Xiaopeng Motor, Changan New Energy, Chery New Energy, and Xiaomi Auto, and continued to deepen cooperation with NEV customers to further expand leading customers in the FMCG, finance and other industries; the effects marketing business continued to be deeply involved in e-commerce, online services, gaming, finance, education and mass consumer industries, focusing on high-quality leading customers. 2) The company continues to improve its overall marketing capabilities, form a certain advantage in operation, AI creativity, strategy integration and live streaming e-commerce tracks, and continue to consolidate its “business+sales” advantage to bring customers full-link marketing effectiveness and business growth. 3) The internationalization of the company's business is developing smoothly. The overseas division signed a strategic cooperation agreement with CheilWorldwide Gyer Group. The two sides will cooperate comprehensively and thoroughly to jointly assist Chinese brands in overseas business and cross-border e-commerce business, and will successively serve the integrated marketing business of Hongqi Overseas, Jietu International, and Nacha Overseas.
Develop “AI+”, complete innovative business infrastructure such as virtual humans, virtual spaces, and virtual objects, and accelerate the digital culture business layout, including cultural computing power bases. The company is speeding up the R&D iteration of “AI+” application products. 1) In terms of virtual humans: “Lan Lan” continues to commercialize the AI lightweight digital human product “Digital Eye”, and the AI digital human production platform “Star Sound Generation” intelligent digital human platform. 2) Cultural tourism: An AI art park with a Greek mythology theme landed in Yangcheng Lake. 3) AIGC's painting tool “Rice Painting”, the literary and cultural tool “Mi Wen”, the metaverse scene production tool “Digital Warrior”, and small marketing vertical industry copywriting models have been launched one after another into commercial applications and cooperated with Secret Tower. In addition, the company established a wholly-owned subsidiary Zhejiang Smart Computing and leveraged Zhejiang Cultural Investment's strategic partners such as Zhijiang Laboratory to provide computing power infrastructure and comprehensive solutions for AI-related business and digital culture development.
The fixed increase was completed, and the mixed reform was officially implemented. In 2023, the company completed targeted issuance, and the shareholding ratio of Zhejiang Weninvestment, a state-owned shareholder, increased to 16.47%, further strengthening its control over the company. At the same time, the company's financial strength and resource integration capabilities have been fully strengthened, laying a solid foundation for the company's sustainable and healthy development.
Profit forecasting and valuation: With the broadening of industry customers and the power of AI, we forecast the company's main business as follows:
1) In 2024-2026, the company's brand marketing revenue is expected to grow at 16%, 15.8%, and 15.5%, respectively; 2) In 2024-2026, the company's performance marketing revenue is expected to grow at 5%, 5%, and 4%, respectively. Overall, we expect the company's fully diluted EPS in 2024-2026 to be 0.16 yuan/share, 0.19 yuan/share, and 0.23 yuan/share, respectively. Referring to the comparable company's 2024 PE valuation, considering that the company is actively exploring the digital culture sector, the company was given a PE valuation of 30-35 times in 2024, corresponding to a reasonable value range of 4.8-5.6 yuan/share, giving it a “superior to the market” rating.
Risk warning. The progress of business development in the digital culture sector fell short of expectations, and the revenue growth rate of the marketing business fell short of expectations.