Key points of investment:

IFLY Spark Model V4.0 was released, fully benchmarking GPT-4 Turbo. According to the company's official WeChat account, since it was fully launched in September 2023, the iFLY Spark App has accumulated 0.131 billion downloads in the Android open market, ranking first among domestic utility model apps, and a number of popular assistants loved by users have emerged around writing, programming, work, and study. With the “618 Big Promotion” in 2024, sales of smart hardware supported by the Spark Big Model increased by more than 70% year-on-year, and the average number of monthly uses exceeded 40 million. On June 27, based on the country's first domestically produced 10,000 card computing power cluster “Flying Star 1”, the iFLY Starfire Model V4.0 was officially released. Seven core capabilities were fully upgraded, fully benchmarked GPT-4 Turbo, and surpassed in terms of text generation, language understanding, knowledge question and answer, logical reasoning, and mathematical ability. IFLY Spark V4.0 has been further upgraded in terms of graphic recognition capabilities, and its application effectiveness in scientific research, finance, medical care, administration of justice, and office scenarios is already ahead of GPT-4o. In addition, Spark's long text capabilities have also been upgraded, and the industry's first traceability function has been launched for the first time in response to the illusion of long document knowledge questions and answers. The external mainstream test set also shows the leadership of iFLY Starfire V4.0. In the mainstream test concentration of 12 major models in Chinese and English at home and abroad, iFLY Spark ranked first in 8 test sets, surpassing international models such as the GPT-4 Turbo.

The iFLY Spark App and desktop version released “Personal Space” to create an AI-only assistant. Liu Qingfeng, Chairman of iFLYTEK, believes that AI assistants should be able to personalize expressions based on user portraits, perform memory learning based on usage history, and enhance learning based on personal data. When constructing a user's personal portrait, the personality style can be selected by oneself or improved based on conversation and usage history to form a personalized style of expression; AI assistants can generate personalized and targeted content by combining personal data. Based on this, the SmartFly Spark App and desktop version were newly upgraded, and the “Personal Space” was the first to be released. Users can upload all kinds of information about their work, study, life, health, etc., to form an exclusive knowledge base for everyone, and combine personality to allow the big model to generate more personalized content. In addition, iFLY Spark launched the first batch of 14 smart devices to create exclusive assistants for specific scenarios. The Spark model has also opened up the entire iFLY C-terminal software and hardware product ecosystem. Millions of iFLY smart hardware users own the “Starfire Family Bucket” with one click. For example, iFLYTEK's smart office book and smart voice recorder files can be synced to Spark's personal space with one click. Through data exchange and operation linkage, meeting records from an office book can be synchronized to Spark, so that Spark can write official documents, make PPTs, and generate to-do items, etc., bringing a more efficient office experience.

iFLYX Medical's App has been upgraded to create a personal AI health assistant. According to the company's official WeChat account, iFLYTEK upgraded the iFLYTEK app for personalized applications in professional fields, and released a personal digital health space to create an AI health assistant for everyone and every family. This time, iFLY Spark Medical's big model has been upgraded once again, and its core medical capabilities have completely surpassed GPT-4 Turbo. Based on this, the capabilities of the iFLYX App have continued to be upgraded, covering 1,600 common diseases, 2,800 common drugs, and 6000 common tests to meet the core health needs of users before, during, and after medical examinations. Currently, the total number of downloads of the SmartPay app is 12 million, the user praise rate is 98.8%, and the active recommendation rate is 42%. The “Personal Digital Health Space” launched on the IFLYX app can build a personal digital health space based on personalized user data such as electronic medical records, examination reports, and physical examination reports. It can further analyze the causes of symptoms before medical treatment, give individualized judgments on drug contraindications during medication use, jointly compare data changes after the examination, and understand the health status of other family members through role switching.

The first Spark smart reader was released, and the company's AI+ education layout achieved a breakthrough. According to the company's official WeChat account, thanks to the upgrade of the large pedestal model and the further improvement of the graphic recognition effect for complex educational scenarios, iFLYTEK released the first Spark smart review machine, which integrates intelligent correction, academic analysis, and personalized work. It supports free layout and unlimited paper size work. While supporting multi-disciplinary and multi-topic intelligent correction, it can also instantly generate multi-dimensional academic reports, providing material for teachers' homework reviews and face-to-face criticism. According to the demonstration of the entire process of correcting assignments on the Spark Smart Review Machine, 15 student assignments can be corrected in half a minute. The correction also simulates real handwriting, which is almost the same as the teacher's usual correction homework. With the Spark smart review machine, the teacher has an additional AI assistant that reduces the burden and increases efficiency. The homework that originally took 90 minutes to correct can now be completed in 5 minutes; the original manual analysis of academic conditions can now be completed in 1 minute; thanks to personalized assignments, the student's error resolution rate has also increased from 50% to 73%. In the 2024 college entrance examination evaluation, iFLY Spark was rated by the outside world as a “big model who can do more questions.” This time, the iFLY AI learning machine equipped with the Spark model has been further upgraded to the AI 1-on-1 question-answering and tutoring function. It can not only perform multi-modal heuristic explanations, free questions and personalized answers, but also perform interactive exploratory learning, super anthropomorphic guided learning, etc., giving the child an additional “AI assistant teacher.” The data shows that compared to traditional problem-solving video learning, the AI question-answering and tutoring learning method increased children's learning completion rate to 90% and the problem solving rate to 93%. We believe that the release of the Spark Smart Reader has enabled the company to achieve a breakthrough in the AI+ education field, further expanding from student-side learning machines to teacher-side reviewing machines, and further expanding the company's market space in the field of education.

The Spark Voice model has been fully upgraded, and the application field continues to expand. According to the company's official WeChat account, iFLYTEK recently won the first prize of the National Science and Technology Progress Award as the first completion unit for the “Key Technologies and Industrialization of Multilingual Intelligent Voice” project. This time, the big Starfire voice model ushered in a new breakthrough. Facing the Internet of Everything era, the Spark Voice Model released this time has multi-language multi-dialect switch-free speech recognition capabilities, which can support “free conversation” in 37 languages and 37 dialects. Among them, the recognition performance of 37 languages was ahead of OpenAI Whisper-v3, and the recognition performance of 37 dialects increased by an average of 30%. On site, iFLYTEK demonstrated the voice input effect of the iFLYX input method for mixing dialects and foreign languages, which can greatly improve input efficiency. iFLYTEK also released the iFLYTEK simultaneous transmission system with integrated software and hardware, which can be used in multiple scenarios such as simultaneous conference transmission, simultaneous conference transmission, exhibition hall simultaneous transmission, and simultaneous travel transmission. In response to speech recognition problems in high-interference scenarios, iFLYTEK has broken through voice transcription technology for extremely complex scenes in multi-person mixed scenes, and can achieve 86% speech recognition accuracy even in scenes where three people are mixed and spoken. In the future, multi-modal speech recognition technology will be applied to office products such as iFLYX Hearing Smart Office Service Platform and smart screens. The big model is driving the transformation of human-computer interaction, and all applications in the field of voice deserve to be restructured. With the support of the big model, Starfire's smart cockpit has been newly upgraded. It not only has “free interaction” in multiple languages and dialects, but also has multi-emotional and multi-modal superhuman interaction, making car interactions more warm. Currently, in the automotive sector, iFLYX's voice interaction products rank first in the domestic market share, and are also widely exported to all parts of the world. The Spark model is a highly intelligent interactive experience for many models from car companies such as FAW, Chery, Guangzhou Automobile, JAC, and Great Wall. In order to better implement the big model, iFLYTEK has also created a cloud-based, software-hardware-integrated solution to enable more industry scenarios such as home appliances and robots. Facing the needs of companies with physical intelligence and humanoid robots, iFLYTEK officially released the Robotic Superbrain Platform 2.0, the first in the industry to support multi-modal interaction. Currently, over 400 robotics companies have adopted the iFLYTEK Robotics Superbrain platform. We believe that with the comprehensive upgrade of the company's Spark Voice model, related application fields will continue to expand, and the company's technical advantages in the voice field will be a solid support for the company's future development.

The Spark Enterprise Intelligence Platform was officially launched to create an AI assistant for each position. According to the company's official WeChat account, since it was released on May 6, 2023, the iFLY Spark model has become the first choice for leading companies in various fields such as China Energy Group, CNPC, China Mobile, China Insurance, Pacific Insurance, and Bank of Communications. iFlyCode, a product based on Spark's capabilities based on Spark's large model capabilities, has achieved application results in many typical scenarios such as code, compliance review, customer service, bid evaluation, and intelligent interaction. Using Transport Bank as an example, iFlyCode, a product based on Spark's big model capabilities, covers 6000+ R&D personnel, and the code adoption rate has reached 38%, and work efficiency has improved markedly. Regarding how to better solve the “last mile” problem of enterprise big model application, iFLYTEK Chairman Liu Qingfeng said that companies must first scientifically understand the boundaries of big model capabilities, choose appropriate solutions according to the difficulty of the task, and use less computing power and higher efficiency to create enterprise-specific big models. With the release of iFLY Spark V4.0, he believes the time has come to use smart platforms to create exclusive assistants for every position. The live Spark Enterprise Intelligence Platform was officially released. Focusing on the three key capabilities of building smart devices, the current enterprise intelligence platform has covered 400+ AI atomic capabilities, integrated 90+ external signal sources, and opened up 100+ internal IT systems, enabling enterprises to quickly build intelligent applications that can be implemented in accordance with business scenarios. The platform also launched 32 enterprise agents around the production domain, science and innovation domain, office domain, and management domain for enterprises to plug and play.

Based on the enterprise intelligence platform, iFLYTEK has created typical application cases such as Spark Business Opportunity Assistant and Spark Bidding Assistant to sample enterprise applications. Among them, Spark Business Opportunity Assistant can help improve the efficiency of first-line sales and business opportunity management by knowing everything about business opportunity leads, improving the quality and efficiency of customer visits, and making intelligent sales management decisions. Through functions such as pre-bid sourcing, intelligent bid evaluation, and bid review, Spark's bid evaluation assistant has a human-machine agreement rate of 98% and an abnormal bid detection rate of more than 80%, greatly improving the efficiency of enterprise bid evaluation while reducing procurement costs. In addition, the code agent iFlyCode integrates six major scenario agents, including code generation assistants, architecture design assistants, code Q&A assistants, testing assistants, database optimization assistants, and code review assistants, increasing the adoption rate from 30% to 52%, greatly improving the practicality of enterprise agents. We believe that the launch of the Spark Enterprise Intelligence Platform is expected to help the company develop AI2B, thereby boosting the company's performance growth.

Profit forecasting and investment advice. We believe that the iFLY Starfire Model V4.0 released by the company has achieved comprehensive benchmarking against the GPT-4 Turbo. This indicates that the company's big model has reached the world's leading level. Along with model upgrades, the company's AI2C (“Personal Space”, IFLY Smart App, Spark Smart Review Machine, etc.), AI2B (Spark Smart Cockpit, Robotic Superbrain Platform 2.0, Spark Enterprise Intelligent Platform, etc.) side businesses have all expanded and broken through, along with the continuous development of the Flying Spark Model V4.0 in the future. Business development is also expected to continue to accelerate. We expect the company's 2024-2026 revenue to be 22.622/26.697/32.331 billion yuan respectively. After comprehensive consideration, we gave the company 5-6 times the 2024 dynamic PS, corresponding to a 6-month reasonable value range of 48.93-58.71 yuan, maintaining the “better than the market” rating.

Risk warning. Large model implementation or commercial value falls short of expectations; order growth falls short of expectations; AI technology research and development falls short of expectations, commercial application implementation process is slow; market competition intensifies, etc.