Focus Technology is one of the core platform players in the B2B cross-border e-commerce circuit. The business model is mature and the operation is steady.

Since its establishment, the company has focused on small and medium-sized enterprise customers and provided them with cross-border e-commerce services. It has operated many high-quality brands such as Made in China Network, Doba, InqBrands, and New One-stop Insurance Network. Judging from financial analysis, the company's financial operations are steady, and contract debt and other non-current debt indicators reflecting pre-received revenue continue to rise; gross margin is high under the SaaS membership subscription model; the R&D expense ratio declined sharply in '23, and operating efficiency and profitability continued to improve.

The scale of cross-border e-commerce imports and exports has risen rapidly, and private enterprises as key customers have become the core players in foreign trade. China's foreign trade imports and exports continue to rise. Among them, cross-border e-commerce imports and exports expanded rapidly, with a compound growth rate of 17% in 19-23, which gave impetus to foreign trade imports and exports. The share of private enterprises in foreign trade exports as core customers of China's manufacturing network has continued to rise. Since 2019, they have been the largest foreign trade players, accounting for 53.5% of foreign trade imports and exports in 23, and are the main force in the foreign trade export industry.

Building the AI Michael, a foreign trade assistant, is expected to drive both the number of members and ARPU. AI Michael has four major sector functions: product launch, content generation, business opportunity follow-up, and industry customer development. Made in China Network members can use AI Michael by subscribing to monthly packages, half-year packages, annual packages, and purchasing fuel packs, etc., and its functions have greatly improved efficiency. By the end of 2023, the number of members who purchased AI Michael was around 4,000, bringing in more than 20 million yuan in cash back, which is expected to continue to increase the number of subscription members and ARPU value.

Cross-border businesses represented by InqBrands and Doba can reach overseas C-side customers and expand the second growth curve. Using AI, Doba launched an AI shopping guide application to optimize and enhance the buyers' platform experience; inqBrand can provide services such as brand planning, supply chain management, marketing promotion, multi-channel sales, warehousing and logistics integration, and support the delivery of various types of orders such as B2B and B2C. As foreign trade recovers and the trend of SMEs going overseas becomes more obvious, the cross-border business is expected to collaborate with the Chinese manufacturing network business to create a second growth curve.

Investment advice: We expect the company to achieve operating income of 1,781/20.64/2.60 billion yuan in 24/25/26, an increase of 17%/16%/14%; realized net profit of 475/562/654 million yuan, an increase of 25%/19%/15% year on year.

Considering the company's undervaluation and high growth rate, we covered the company with a “buy” rating for the first time.

Risk warning: AI technology implementation falls short of expectations, product market competition intensifies, untimely data updates, etc.