Introduction to this report:
The increase in the scale of cloud asset transactions in the company's financial industry drove revenue growth, but increased expenses led to a decline in profits. The company increased AI investment and accelerated the layout of inclusive finance and wealth management, and continued to be optimistic about the company's growth.
Key points of investment:
Maintain the “Overweight” rating and maintain the target price of HK$17.02, corresponding to 21xPE in 2024.
The company's revenue for the first half of 2024 was RMB 1.321 billion (same unit), +6% year on year, and adjusted net profit was 0.197 billion yuan, -13% year over year. Maintain the 2024-2026 revenue of $3.1/3.69/4.52 billion, and adjusted net profit of $0.44/0.55/0.64 billion, maintain the “gain” rating, and maintain a target price of HK$17.02, corresponding to 21xP/E in 2024.
The cloud in the financial industry helped increase revenue, and increased expenses led to a decline in profits. The company's BaaS business revenue was 0.9 billion yuan, +11% year over year. The business included financial industry cloud revenue of 0.589 billion yuan, +20% year over year, which was the main cause of BaaS business growth; the financial industry cloud asset transaction scale reached 26.2 billion yuan, an increase of 23% year over year, which was the main reason for the increase in cloud revenue in the insurance industry; the insurance industry's cloud revenue was 0.31 billion yuan, -3% year over year, mainly due to the combined impact of reporting and banking. The company's MaaS business revenue was 0.42 billion yuan, -2% year over year. The number of core customers increased 13% year over year to 165, but the average revenue of core customers fell to 1.996 million yuan, which is the main reason for the decline in MaaS business revenue. Cost-side sales expenses, administrative expenses, and R&D expenses were +10%/13%/12% year-on-year, respectively. Profits declined year-on-year due to cost increases.
Continue to increase investment in AI to accelerate the deployment of inclusive finance and wealth management. The company continues to increase investment in AI research and development, and has achieved results in both intelligent voice and digital people. Intelligent voice technology has significant latency advantages over peers, not only supporting voice recognition but also emotional recognition and emotional voice output, providing a more user-friendly interactive experience; the digital human side already uses the company's digital human technology in bank reception scenarios and retail department store shopping guide scenarios, and the company continues to expand its business boundaries through AI technology. Furthermore, the company closely follows customer needs and lays out inclusive finance and wealth management to better meet the financing needs of small and micro enterprises and better meet the asset preservation and appreciation needs of C-side customers.
Catalyst: The company's product experience is optimized under the iteration of AI technology, and the customer's willingness to pay is increased.
Risk warning: The decline in credit demand has led to a decline in the scale of asset transactions; stricter data collection and supervision policies are driving up the company's operating costs.