Key points of investment:
The company released its 2024 semi-annual report: 24H1 revenue of 9.32 billion yuan, a year-on-year increase of 18.9%; net profit to mother -0.4 billion yuan, which turned into a year-on-year loss; after deducting non-net profit of -0.48 billion yuan, the loss increased 58.9% year-on-year. Among them, 24Q2 revenue was 5.68 billion yuan, up 14.6% year on year, net profit due to mother - 0.1 billion yuan, which turned loss year on year; after deducting non-net profit - 0.04 billion yuan, which turned loss year on year. The company's revenue side continued to grow steadily, and profits were within the previous performance forecast range, in line with market expectations.
Gross profit and repayments continued to grow healthily. The company's gross profit margin for the first half of the year was 40.2%, which was basically the same as the same period last year, and gross profit increased by about 0.6 billion yuan over the same period last year. At the same time, according to the semi-annual report, the company 24H1 added more than 0.65 billion yuan in large model development and autonomous, controllable and large model implementation. Although it had an impact on short-term business performance, it consolidated the company's industrial position in the national artificial intelligence team. In addition, 24H1's total sales payback was 9 billion yuan, an increase of 1.5 billion yuan over the same period last year; 24H1's net operating cash flow — 1.54 billion yuan, is basically the same as the same period last year. The company currently attaches great importance to the risk management of accounts receivable, and operating cash flow is expected to rectify throughout the year.
Empowering large models to help the B/C side core business grow at a high level. In the first half of the year, the company upgraded to release the iFLY Starfire V4.0, which fully rivals GPT-4 Turbo in terms of base capability. Based on leading large-scale model capabilities and the accumulation of rich implementation scenarios, the company's B-side and C-side key businesses maintained a good growth momentum: 24H1 education products and services increased 25.1% year over year; medical business increased 18.8% year on year; open platforms increased 47.9% year on year; smart hardware grew 56.6% year on year; and automobile business grew 65.5% year on year. Although the current G-side business continues to be under pressure, with the optimization of the business structure, it is expected that the company's future growth will be more resilient.
The cost side continues to invest heavily to seize the new historical opportunities of general artificial intelligence. 24H1's sales/management/R&D expenses increased by 11.8%/9.0%/27.4%. On the one hand, the company invested heavily in the development of large models, and on the other hand, actively marketed and promoted the Spark Big Model. At the same time, the company is also steadily advancing the strategic focus of the business, strengthening quality and efficiency. It is expected that per capita revenue and gross profit per capita will continue to increase, and profitability will gradually be unleashed.
Management's intention to increase its holdings shows confidence. At the same time, the company announced that President and Director Wu Xiaoru, Director and Vice President Nie Xiaolin, and Director, Vice President and Board Secretary Jiang Tao, intend to increase their total shares by no less than RMB 20 million within 6 months, demonstrating confidence in the company's long-term development.
Investment analysis: Considering macro-environmental pressure, the slowdown in G-side business demand, and saturated investment in AI models, we lowered the 2024-2026 net profit forecast to 0.763/1.271/1.572 billion yuan (the original forecast value was 0.946/1.546/1.914 billion yuan), corresponding to 2024-2026 PE 103/62/50 times, respectively. Facing the huge industrial opportunities of the big model, the company is transitioning from a period of concentrated investment to a period of large-scale application implementation, and has formulated a clear strategy to realize the dividends of the big model, provide strong momentum for long-term growth, and maintain a “gain” rating.
Risk warning: Competition in the big model and artificial intelligence market intensifies; the commercialization results of the big model fall short of expectations; investment in education informatization falls short of expectations; risk of delays in TOG projects; risk of accounts receivable recovery.