Incident: The company released its semi-annual report for '24, and achieved operating income of 9.325 billion yuan (+18.91%), net profit to mother of 0.401 billion yuan (-644.59%), deducting non-net profit of -0.483 billion yuan (-58.86%).
The company's increased investment affects profit-side performance and lays the foundation for long-term competitive advantage. In the first half of '24, the company achieved net profit without deduction of -0.483 billion yuan, a year-on-year decrease of 58.86%. The main reason is that the company firmly invests in core technology research and development, strives to update and iterate the company's products, and has invested more than 0.65 billion yuan. In addition, the return on investment in the same period last year was relatively high, and 24H1's investment income and other income decreased, putting pressure on the profit side.
Although the above investment affected current profits to a certain extent, the company's core capabilities in terms of autonomy and control of core technology, including the universalization of models, have laid a solid foundation for the company to continue to maintain its advantage in large-scale industry competition.
The Spark Big Model has been introduced, leading the country in comprehensive capabilities. On June 27, 2024, “iFLY Starfire” V4.0 was officially released 2 months after the launch of V3.5. As the only domestic open model based on domestic computing power training, it is fully autonomous and controllable. Seven core capabilities have been improved, and it has completely overtaken GPT-4 Turbo. In the 12 mainstream Chinese and English test sets at home and abroad, Starfire V4.0 ranked first in the 8 test sets. The “iFlystar” voice model broke through again, releasing 74 languages/dialects without switching conversations, solving the problem of speech recognition under strong interference, and releasing extremely complex speech transcription technology.
Improve iFLYX's open platform and promote the implementation of AI ecosystems in various industries. On January 30, 2024, “iFLY Spark” launched the first major open source model, Spark Open Source 13B, to accelerate ecosystem co-construction for first developers and help academic cooperation and industry exploration. The company is also working with leading enterprises in various industries to create industry model application benchmarks in various fields to accelerate industrial upgrading. In the first half of 2024, education products and services achieved revenue of 2.86 billion yuan, a year-on-year increase of 25.14%; the medical business achieved revenue of 0.228 billion yuan, an increase of 18.80%; while the open platform, smart hardware, and automotive businesses achieved year-on-year revenue growth of 47.92%, 56.61%, and 65.49%, respectively. As of June 30, the number of developers added to the iFLYX Open Platform exceeded one million, and the cumulative number of overseas large-scale model developers exceeded 0.5 million.
According to the company's 2024 mid-year report, increasing the R&D expense rate and impairment loss, and lowering the sales expense ratio, financial expense ratio and other income, we forecast that the company's earnings per share for 24-26 will be 0.16/0.35/0.42 yuan (the original forecast was 0.32/0.41/0.49 yuan). Using the PS valuation method, the corresponding target price was 40.23 yuan, and the corresponding target price was 40.23 yuan.
Risk warning
Business development falls short of expectations, risk of R&D investment exceeding expectations, risk of fluctuating valuation levels, risk of falling other returns, risk of rising impairment losses, risk of increasing leverage ratio