Event: On August 21, 2023, the company released its 2024 mid-year report. 2024H1 achieved revenue of 9.325 billion yuan, an increase of 18.91% year on year; net profit to mother was 0.401 billion yuan, which changed from profit to loss year on year; net profit after deducting non-return net profit of 0.483 billion yuan, loss increased year on year (-0.304 billion yuan in the same period last year). The results are in line with market expectations.
Key points of investment
Continued increase in R&D investment affects short-term profits. 2024Q2 achieved revenue of 5.678 billion yuan in a single quarter, up 14.62% year on year; 24Q2 achieved net profit of 0.1 billion yuan, year-on-year profit and loss; 24Q2 achieved deduction of non-net profit of -0.043 billion yuan, year-on-year profit and loss. The company's gross profit increased by 0.601 billion yuan in the first half of 2024, and its non-net profit decreased by 0.179 billion yuan compared to the same period last year. The main reason was that the company actively seized the new historical opportunities of general artificial intelligence. In the first half of 2024, it invested more than 0.65 billion yuan in big model development, autonomous and controllable industrial chain, and the implementation and expansion of the large model industry. In addition, other factors affecting net profit falling 0.474 billion yuan compared to the same period of the previous year include the large return on investment in financial assets such as Trio and Cambrian in the first half of 2023. Investment income and fair value changes in the first half of 2024 decreased by 0.149 billion yuan compared to the same period last year; other income decreased by 0.146 billion yuan compared to the same period last year; and preparation for bad debts increased by 0.083 billion yuan compared to the same period last year. The total sales payback of 2024H1 was 9 billion yuan, an increase of 1.5 billion yuan over the same period last year.
With the support of the Spark model, core business continues to grow rapidly. In the first half of 2024, education products and services achieved revenue of 2859.7147 million yuan, up 25.14% year on year; medical business achieved revenue of 228.1016 million yuan, up 18.80% year on year; open platform achieved revenue of 2344.5988 million yuan, up 47.92% year on year; smart hardware achieved revenue of 899.8732 million yuan, up 56.61% year on year; automobile business achieved revenue of 352.3681 million yuan, a year-on-year increase of 65.49%.
Continue to explore application implementation and cooperate with leading customers in many key industries. In the first half of 2024, the company quickly promoted large-scale model research and development on an autonomous and controllable platform, further consolidated its position as a national team in the artificial intelligence industry, effectively explored key product directions for large-scale model application implementation, and made healthier adjustments to the company's business structure. iFLYTEK has become a major model partner for leading companies in key industries such as China Energy Group, CNPC, China Mobile, China Insurance, Pacific Insurance, Bank of Communications, Chery, FAW, Volkswagen, Haier Group, and Midea Group. As the artificial intelligence industry continues to usher in a more favorable industrial development environment, the company is expected to maintain higher quality development.
Profit prediction and investment rating: The leading domestic model is expected to fully benefit from the development of the AI industry. Maintaining 2024-2026 net profit of 0.913, 1.196, and 1.528 billion yuan, respectively, corresponding PE was 86, 66, and 51 times, respectively. Maintain a “buy” rating.
Risk warning: Policy progress falls short of expectations; technological progress falls short of expectations; competition intensifies the impact.