We have been deeply involved in the industry for many years and have built a leading enterprise in integrated digital services. The company was founded in 2002. Since its establishment, it has successively carried out static digital creative services, dynamic digital creative services, and integrated digital display engineering services. The company's business scale and technical strength have continued to improve, and it has successively undertaken digital creative services for large-scale projects such as the Shanghai World Expo, and has become a leading enterprise in the digital display industry. The company has rich industry expertise and is one of the most experienced and large-scale companies in the digital display industry.
Focus on R&D investment and actively explore AI+3D technology. The company maintained a high investment in R&D. The R&D expenditure rate in the past three years was 5.17%/5.65%/6.06%, respectively, which is higher than the level of comparable companies. We believe that digital display is a typical knowledge-intensive industry, so the company has focused on technological innovation and talent team building since its inception. With continuous investment in R&D, the company has rich 3D multimedia integration technology and deep 3D data asset accumulation; at the same time, the company actively embraces AI technology in creative content production, and supports the team to apply AIGC technology to assist basic creation in image production and 3D modeling, gradually increasing output levels and gross profit margins to achieve cost reduction and efficiency.
Develop the digital twin and virtual digital intelligence business to create the company's second growth curve. The company is currently adapting to industry trends and focusing on building virtual digital intelligence and digital twin businesses. In terms of virtual digital intelligence, the company provides a full chain of virtual digital intelligent production services, and has created benchmark cases such as “Ewen Wen”. While empowering traditional businesses, it can also innovate revenue sources such as IP operations and live streaming of content. In terms of digital twins, the company developed its own FT-E digital twin rendering engine based on a localized B/S architecture, which is technically autonomous and controllable and has passed Huawei certification. The addition of digital twin technology can form a three-dimensional service model of “digital creative products and digital integrated solutions” with the original business, increasing the breadth and depth of the original service. We believe that with the steady development of the company's innovative business, its business model is expected to shift from a non-standardized project system to standardization, empowering traditional businesses while also becoming the company's second growth curve.
Investment advice: In 2024-2026, we expect the company to achieve revenue of 739/8.97/1,035 million yuan, net profit to mother of 0.60/0.75/0.93 billion yuan, and EPS of 0.57/0.72/0.89 yuan, respectively, corresponding to the current PE price of 34.3/27.3/22.1 times. The company's main business is recovering well. AI+3D has opened up room for growth. The standardized platform model brings profit flexibility, coverage for the first time, and a “buy” rating.
Risk warning: Competition in the industry intensifies, new business development falls short of expectations, risk of macroeconomic fluctuations, risk of bad accounts receivable, etc.