Incident: From July to August 2024, the iFLY Spark Model continued to be implemented in depth: On July 18, it won the bid for the first tobacco model, the Zhejiang Tobacco Big Model; on July 23, it won the bid for the financial asset management industry's first project to build a knowledge base (RAG) based on the big model - China Cinda Asset Big Model Knowledge Base project; on July 24, the big code model landed the first order for R&D and application in the industrial field - China Steel Research AI Big Model Code Development Assistance Project; in June and August, the company won the bid for China Resources University Service Model twice Model dock tool chain projects, etc.
The Spark Model took the lead in commercialization in various fields such as education, energy, and medical care. In the field of education, the company has successively launched educational aids equipped with large model capabilities, such as AI learning machines, Spark smart classrooms, Spark teacher assistants, Spark smart blackboards, and Spark readers. In the energy sector, the company has become the choice of leading customers in industries such as CNPC, China National Energy Group, China Coal, etc., and has joined hands with the National Energy Group to build a large-scale industry model for multiple business formats and scenarios in the energy industry, empowering coal, electricity, transportation, chemicals, etc., and setting a benchmark for large-scale model application of central enterprise groups. In the medical field, the iFLYX App can currently diagnose 1,600 common diseases and more than 2,000 symptoms, identify more than 2,800 common drugs, and understand 0.26 million drug interactions; the iFLYX App currently has a cumulative total of 12 million downloads, 98.8% of users, and a 42% user recommendation rate. Furthermore, companies in other fields such as finance, automobiles, and home appliances all have leading capabilities in implementing large-scale model applications.
The short-term performance of 2024H1 is under pressure, and the big model firmly invests in consolidating the position of the AI national team industry. Earlier, the company officially disclosed its semi-annual results forecast on July 6. Net profit for the first half of the year is expected to be -0.46 billion yuan to -0.38 billion yuan, which turned into a year-on-year loss (73.57 million yuan for the same period last year); after deducting non-net profit, it is estimated to be -0.5 billion yuan to -0.42 billion yuan, increasing the year-on-year loss (-0.3 billion yuan for the same period last year). The company's gross profit increased by about 0.6 billion yuan in the first half of 2024. The main reason for the decline in net profit and net profit after deduction from the same period last year was due to the company's firm investment in general artificial intelligence recognition models. In 2024, H1 added more than 0.65 billion yuan in large-scale model development and industry implementation and expansion. In the first half of 2024, while making every effort to increase the R&D investment of the “iFLY Spark Big Model”, the company accelerated the implementation and promotion of the big model; while actively adjusting the revenue structure, it achieved an estimated 15% to 20% increase in revenue and gross profit. In addition, the company's core businesses, such as education, healthcare, automobiles, open platforms and consumers, are developing healthily, and business operations have maintained good growth.
Investment advice: In view of increased US sanctions and short-term AI investment, the company's net profit forecast for 24-25 was lowered to 0.86/1.18 billion yuan, compared with the previous forecast of -55%/-59%; the 2026 forecast was increased by 1.52 billion yuan. I am optimistic that the company will continue to benefit under the trend of the artificial intelligence industry and maintain the “gain” rating.
Risk warning: Artificial intelligence has fallen short of expectations, and market competition has intensified.