The concept of AI is like a fierce storm, sweeping through every corner of the capital markets. As the mid-term financial report season unfolds, the market is facing a severe practical test, and companies that can adapt to the digital wave, actively promote their own transformation, and achieve commercial success should receive the attention of the capital markets.

Recently, ys Digifavor (03773.HK) released its 2024 mid-term performance, providing strong evidence of its outstanding performance in digitization.

In the first half of 2024, the company's total revenue was 61.3 million yuan, a year-on-year increase of about 99%; the net income attributable to the parent company reached 21.3 million yuan, a year-on-year increase of 2266.7%. All indicators demonstrate ys Digifavor's strong growth momentum and profitability in the digital economy field.

Both core data achieved high growth, especially the significant improvement in profitability, which is impressive. Overall, this is a very satisfying achievement. The capital market also showed confidence in this financial report, with the company's stock price rising more than 9% intraday and ultimately closing up 4.75%, reaching a new high since its listing in 2016.

Next, I will take this report card as a starting point to see what ys Digifavor did right in the first half of this year and what long-term value and development potential it has.

1. The transformation is effective, and ys Digifavor sets sail

Since its establishment in 2006, ys Digifavor, formerly known as 007KA, has been providing mobile phone fee marketing services to customers through the digital product aggregation platform in cooperation with telecommunications operators, serving many banks and enterprises.

Although this business has stable revenue and profit in the past few years and the company has a high market share, the company's business model is relatively single and customer concentration is high, which has not led to significant growth in its scale. In this context, how to achieve high-quality development through transformation has become a major issue that ys Digifavor faces.

Therefore, since the end of 2022, the new management team of ys digifavor, led by Chairman of the Board Zhou Jinhui and CEO Guan Heng, has led the company into a new stage of business upgrading.

This is first reflected in the company's culture and strategic positioning. In 2023, the company officially changed its name from "Nian Nian Ka" to "Yin Sheng Shu Hui" (Digifavor), which represents the company's all-round acceptance of the digital economy and clear planning for future business direction. The new name not only conveys the company's vision of enabling the "digital" economy to benefit the masses, but also signifies the company's desire to benefit enterprises and the people through digital equity and smart marketing, achieving the effect of inclusive finance.

In early 2023, the company formed a new team in Beijing, becoming a local life service provider on the Douyin platform, providing marketing services to offline merchants through new forms such as short videos and live streaming. By mid-year, the company established the Equity Business Center in Wuhan and successfully developed the digital intelligent equity product system, "Shu Hui Master", which efficiently integrates upstream and downstream product services and resources, laying a solid foundation for the company to serve more customers. At the end of the year, Yin Sheng Shu Hui established the Digital People Business Division in Changsha, cooperated with Tencent Zhiying, and jointly explored the application of digital people in the AIGC industry of the financial insurance industry. Through co-creating digital people scenarios and other methods, both parties explore the commercial value and possibilities of digital people, and jointly explore the vertical applications of digital people in various industries.

This series of strategic layouts has enabled Yin Sheng Shu Hui to achieve significant business results in the first half of this year. Since last year, the company has successfully won multiple digital marketing and equity product service projects, including Bank of China, China Construction Bank, Postal Savings Bank of China, CM Bank, Minsheng Bank, China Everbright Bank, Bank of Beijing, Bank of Jiujiang, Zybank and other large state-owned banks, joint-stock commercial banks, and city commercial banks. In addition, Yin Sheng Shu Hui has also established cooperative relationships with QQ Music, Alipay, and other internet giants, aiming to provide users with more abundant and higher quality digital equity products and services, further consolidating the company's leading position in the digital economy field.

In the first half of this year, based on the foundation laid in 2023, the company deeply tapped into the blue ocean of digital equity commodities, and through further integration of industry resources, provided more equity-based digital marketing program planning and operation for the above-mentioned customers, achieving double improvement in revenue and profit. Data shows that in the first half of this year, the company's digital marketing service revenue was about 8.16 million yuan, a year-on-year increase of 1519%.

With the landing of more new customer businesses in the second half of the year, Yin Sheng Shu Hui's revenue from digital marketing services will have even better performance. It seems that the proportion of this business will continue to rise, and the company is expected to gradually form a pattern of dual-drive by the two major business segments, better realizing the company's new mission and vision.

Second, seizing the AI trend and staying ahead in the industry.

In fact, the reason why Yin Sheng Shu Hui was able to achieve such impressive results in the first half of this year is not only related to the company's active promotion of business upgrading and breakthroughs, but also whether the company is in a "sunny" track. And as a long-term investor, when paying attention to the future development space of a company, the first thing to focus on is the development trend of the industry it is in.

In recent years, driven by a solid market foundation and multiple favorable policies, the development of the digital economy has accelerated. According to data released by the National Bureau of Statistics, the added value of China's core digital industries is expected to exceed 12 trillion yuan in 2023, accounting for about 10% of GDP.

In addition, according to relevant data, by 2023, nearly half of Chinese advertisers have applied AIGC technology in their online marketing activities, with over 90% focusing on content creation and creative development. This technology-driven advertising and marketing model is gradually taking shape, bringing more possibilities for cost reduction and efficiency improvement for advertisers. It is estimated that 70% of marketing content will be generated and iterated by AI in the next five years, and the global market size is expected to reach 1.35 trillion yuan.

However, the scarcity of digital talents contradicts the rapidly growing market scale. Data shows that the overall shortage of digital talents in China is estimated to be around 25 million to 30 million, and the shortage is still expanding, with the talent shortage expected to continue for 3 to 5 years. It is worth noting that workers themselves have shown a significant increase in training for digital technology-related positions, especially middle-aged individuals in the workplace who are eager to strengthen their knowledge and skills through training in order to keep up with the evolving landscape.

In response to this, YS Digifavor actively takes on social responsibility. Through hosting the certification training for "AI operation specialists" in the "AI Operation Specialist Training Camp" guided by the Ministry of Industry and Information Technology and organized by the Shenzhen Commodity Exchange Market Joint Association's AI Committee, the company systematically and professionally cultivates talents with AI operation skills, striving to create a cradle for AI innovation talents, enabling them to skillfully apply technology to solve practical problems in their work, and create value for enterprises or individuals, further promoting the integration of industry, academia, and research. By empowering the industry chain with a "talent chain," it helps promote the high-quality development of China's AI industry.

YS Digifavor's layout in the field of AI is not limited to this. Faced with the rapid growth of the market, YS Digifavor actively develops innovative businesses with AIGC and successfully applies them in multiple industries, solidifying its core competitiveness. This helps the company effectively improve its penetration rate and seize the market, thereby increasing its growth potential in the competitive market.

YS Digifavor has signed agreements with eight partners, including Tsinghua University's Institute of Fintech, for in-depth cooperation in AIGC technology research and development, big data, digital marketing, and digital human applications. By jointly promoting research topics and industrializing academic achievements, the company accelerates its transformation into a digital and intelligent enterprise.

In March this year, YS Digifavor officially became the Vice President Unit of the Shenzhen Commodity Exchange Market Joint Association and participated in the establishment of the AI Professional Committee. As a Vice President Unit, YS Digifavor will explore and empower major enterprises in the digital transformation and intelligent marketing of commodity trading markets, promoting the digitization process of traditional commodity trading markets. In the same month, YS Digifavor became the Vice President Unit of the Guangdong Province Communication Industry Association, and Guan Heng was appointed as Vice President.

At the same time, YS Digifavor and the Shenzhen Entrepreneurs Association held the "AI Leading Future - Exploring the Intelligent Journey" event, announcing the establishment of the AIGC Business School with the aim of promoting the innovation and transformation of business models. In addition, the company is working with its partners to explore the application of AIGC and digital human technology in the financial industry, aiming to enhance multidimensional services such as business consulting, private domain marketing, personalized services, corporate image building, and personal brand development through these technologies.

In the field of digital cultural tourism, ys digifavor is currently working with local governments to create local characteristic digital cultural tourism projects based on local cultural features and historical backgrounds. This move not only promotes the integration and development of digital cultural tourism and cultural heritage, but also further enhances the upgrade of local consumption scenarios and promotes regional industrial development.

It can be seen that against the backdrop of the vigorous development of the digital economy market, ys digifavor, with its forward-looking strategic layout and outstanding operational capabilities, continues to lead the industry.

It is precisely due to the company's outstanding performance and influence that the company has been recognized by the industry and has become an important participant in discussions and sharing experiences. In July, ys digifavor CEO Guan Heng was interviewed by the "2024 Forbes China Science and Technology Innovation Figures Selection" committee, where he discussed "how digital rights become a new driving force for consumption." In August of this year, at the 2024 Banking Digital Financial Development Forum hosted by China Financial Media and organized by Xiamen International Bank, ys digifavor's AI digital human technology and holographic cabin products became the focus, winning high praise from the attendees. This not only highlights its leading position in the industry, but also reflects its positive contributions to the industry's development.

3. Market cap growth ranks among the top, and future value deserves attention.

In summary, the long-term value of ys digifavor is gradually becoming apparent and is accelerating.

The capital market has long since provided positive feedback on the growth prospects of ys digifavor. In 2023, despite the poor overall performance of Hong Kong stocks, ys digifavor, through its active layout in the digital rights + AIGC field, has won the market's attention and moved beyond the independent market. Data shows that in 2023, ys digifavor's cumulative increase reached 192.31%, ranking third among the top 100 Shenzhen listed companies in Hong Kong.

Since the beginning of this year, the company's stock price has continued to fluctuate upwards. It is worth noting that after the financial report was released, the company's stock price continued to reach new highs, reflecting the market's recognition of this high-quality financial report and its expectations for the company's future growth. As of the close of August 30th, the company's cumulative increase this year has reached 46.93%.

Overall, we are still in the early stages of AI development and application. The market's understanding of AI, acceptance, and ability to integrate it into existing business processes are still evolving. Looking at international giants, many of them have seized the opportunity of AI and entered the market. Currently, AI has demonstrated its powerful drive in increasing the market value of a company.

Taking Meta as an example, the company's AI advertising feature helps advertisers build more effective ads and improve advertising effectiveness. In addition, AI helps Meta determine which platforms and when to display ads to users. Improving the so-called monetization efficiency means that Meta can increase revenue and conversion rates without displaying more ads.

As a result, in the second quarter of this year, Meta reported revenue of $39.1 billion, a 22% year-on-year increase, exceeding analysts' expectations. Net income also rose by 73% to $13.5 billion. The strong performance indicates that Meta has found a way to apply AI: its efforts to sell more targeted ads have paid off. With increasingly efficient advertising and the AI trend, Meta's performance is likely to continue to rise in the coming years.

At the market level, with the blessing of AI, investors have high expectations for Meta's development, reflected in its stock price. Currently, Meta's market cap is about $1.31 trillion, nearly five times higher than its low point in 2022, and there is still room for further growth.

From this perspective, AI, as an important technology that changes the way humans produce and live, has huge development potential and plays a significant role in improving a company's performance and value. YS Digifavor has proactively laid out the AI field and has made positive progress. If it continues to make breakthroughs in digital marketing services, its future prospects are promising. How will the secondary market change and react? Will YS Digifavor become a stock that increases five or even tenfold?

Looking ahead, as YS Digifavor continues to deepen its presence in the AI + digital marketing services field and leverages its leading position in digital marketing and AI industries, it will continuously explore new business models and growth opportunities. With the development of the AI wave, YS Digifavor is expected to become a leader, set sail, and strive for higher goals.