According to the Futubull Financial App, recently fourth paradigm (06682) released its mid-term performance report, with 1H24 revenue of 1.87 billion yuan, a YoY increase of 27.1%; gross profit of 0.79 billion yuan, a YoY increase of 12.1%. The company's 1H24 performance growth mainly comes from the strong growth in revenue from the Prophet AI platform (65.4%), and this performance segment grew by 68.0% for the full year of 2023. 1H24 continues the high-speed growth since 2023. HTSC's research report stated that it continues to be bullish on Fourth Paradigm, leveraging large customers as the pivot, exploring new industries, and increasing the penetration rate in industries already covered. With a solid foundation of enterprise service software, it reconstructs enterprise software with generative AI to enhance customer experience and development efficiency, maintaining a "buy" rating for the company.

It is reported that Fourth Paradigm officially released Prophet AIOS 5.1 version on July 23. This version adds GPU resource pooling (vGPU) capability, realizing centralized management of hardware cluster platforms, on-demand allocation and rapid scheduling of computing resources, saving up to 80% of hardware costs and increasing GPU utilization by 5-10 times. In fact, this is the fifth iteration of the product in the past 10 years. For the past 10 years, Prophet has been committed to addressing the core pain points of enterprise AI applications at different stages.

According to the company's mid-term performance report, 1H24 revenue was 1.87 billion yuan, a YoY increase of 27.1%. Among them, revenue from the Prophet AI platform was 1.25 billion yuan, a YoY increase of 65.4%. The revenue proportion increased from 51.5% in 1H23 to 67.0% in 1H24, with a revenue proportion of 60.6% in 1Q24 and reaching 72.1% in 2Q24. The Prophet AI platform has become the main driver of the company's revenue growth.

In the wave of intelligence, the consensus of "AI reshaping all industries" has taken root. The "solution" provided by Fourth Paradigm is to build the "Fan Ecological" based on its platform strategy. The core of building the "Fan Ecological" is to reduce the threshold and cost of applying AI technology to the digital economy and the creation of new productive forces.

In the process of building the "Fan Ecological", Fourth Paradigm adheres to the principle of open cooperation and works closely with benchmark users and partners to create a series of industry-leading models, such as academic translation models, health management models, and smart water conservancy models.

HTSC stated that Fourth Paradigm continues to implement large-scale models in various industries, and the Prophet AI platform has supported large-scale applications in 14 industries. In 1H24, the company developed more than 30 AI products, working with partners in the "Fan Ecological" alliance, covering over 20 industries including research, production, supply and marketing services by August 1, 2024.

Based on the continuous growth of the company's Xianzhi platform, solutions, and AIGS business, htsc expects the company's revenue to reach 5/6/7.18 billion yuan in 2024-2026 (+19%/20%/20% yoy). Considering the impact of the company's business structure, the net profit attributable to the mother for 2024-2026 is revised down to -0.38/-0.12/0.12 billion yuan (previous value: -0.37/-0.09/0.15 billion yuan). The average 2024E PS for comparable companies is 4.9x. Considering the extensive industry coverage of the Fourth Paradigm and the main customer base being large enterprises, htsc gives the company a 5.3x 2024E PS, maintaining a “buy” rating.