Brief performance review

On August 27, 2024, the company disclosed its 2024 interim results: the company achieved revenue of 1.74 billion yuan in the first half of 2024, up 21.4% year on year; gross profit was 0.77 billion yuan, up 18.2% year on year; net profit was -2.48 billion yuan, loss decreased 21.2% year on year; adjusted EBITDA was -1.89 billion yuan, and loss decreased 6.7% year on year. The company's net cash flow from operating activities in the first half of 2024 was -3.52 billion yuan, an increase of 1.72 billion yuan over the outflow gap in the same period last year.

Management analysis

By business, generative AI revenue for the first half of 2024 was 1.05 billion yuan, a year-on-year increase. Currently, the number of GPUs launched by the company has reached 0.054 million, and the total operating computing power has exceeded 2.0 PFLOPS. Traditional AI revenue was 0.52 billion yuan, down 50.6% year on year, mainly due to a sharp drop in smart city business revenue to less than 10% of revenue. Smart car revenue was 0.17 billion yuan, up 100.4% year on year; 0.705 million new vehicles were delivered in the first half of the year, up 80.0% year on year.

In terms of costs and expenses, the total number of people in the company at the end of June 2024 was 4,672, down 6.9% year on year; the company's share payments decreased and depreciation amortization increased in the first half of the year. The sum of sales, management, and R&D expenses after excluding share payments and depreciation and amortization was 2.13 billion yuan, down 2.1% year on year. During the reporting period, the company's financial revenue increased by 0.18 billion yuan compared to the same period last year, and income tax credits decreased by approximately 0.12 billion yuan. The company's accounts receivable impairment losses increased by about 0.19 billion yuan in the first half of the year, but the increase in accounts receivable amount was small and is expected to be affected by the lengthening age of accounts receivable.

Profit Forecasts, Valuations, and Ratings

According to the 2024 mid-year report, we expect revenue from 2024 to 2026 to be 4.24/5.49/6.89 billion yuan, up 24.6%/29.3%/25.5% year on year; net profit to mother will be -4.69/ -4.07/-3.53 billion yuan, respectively, and losses will narrow 27.1%/13.4%/13.2% year over year, corresponding to 9.8/7.6/6.0 times PS, maintaining the “buy” rating.

Risk warning

The development of AI algorithms fell short of expectations; liquidity in the Hong Kong stock market was reduced; a stable and continuous profit model could not be explored; major shareholders reduced their holdings; and international relations were at risk.