Brief performance review

On August 29, the company disclosed its mid-year report, H1 revenue 0.4 billion/ up 7.6%, net profit to mother decreased by 0.051 billion/ same decrease of 44.0%, minus 0.049 billion/ same increase of 11.8%; 2Q24 revenue 0.22 billion/ same decrease of 6.1%, net profit of 0.035 billion/ same increase of 2.2%, net profit due to mother 0.033 billion/ same decrease of 6.9%; proposed cash dividend of 0.008 yuan/ Shares.

Management analysis

Revenue: Overall, steady, and the share of audio, video, and e-commerce platform transaction sales increased further.

1) H1 revenue also increased 7.6%, and visual content and service revenue also increased 7.6% to 0.4 billion yuan. Overall performance was steady. Among them, audio and video sales increased from 5.2% of 1H23 to 32.0% in 1H24, and e-commerce platform transaction sales increased from 15.7% of 1H23 to 29.2% of 1H24, and the company's ability to serve small and medium-sized enterprises increased. 2) Q2 revenue also fell 6.1%, +28.3% month-on-month, or the same decline was due to the high base for the same period last year.

Profit: The profit structure has changed due to the combination of ideas in the factory, and the profit level is stable. 1) Net interest rates for 1H1 and Q2 were 12.8%, 15.6%, -11.8/+1.3pct, respectively; deducted non-net interest rates were 12.3% and 14.7%, respectively, +0.5/-0.1pct, which was basically the same. 2) Profit structure: H1 and Q2 gross margins are 46.9% and 43.2%, respectively, and are expected to be mainly due to changes in revenue structure after the merger of Guangchang Creative; sales/management/R&D rates have all declined year over year, or due to increased operating efficiency and revenue scale; the main reason for the large year-on-year decline in H1 net interest rate is due to changes in the fair value of Guangchang Creative's original shares. Overall, the company's profit level is rising steadily.

Actively embracing the new direction of AI and 3D, and deepening the layout, it is expected to empower the main business and bring growth.

1) H1 continues to implement “AI+content+scenario”, relying on the big model of the visual creative AI industry to provide AI intelligent technology services; and combines AI technology to further deepen customer workflows to meet their individual needs; at the same time, it also serves more C-end users; the battle investment company iDesign & AIPPT has entered the AI office. Currently, Aippt.cn ranks first in the AIPPT field in terms of monthly user visits. 2) The deepening of the 3D layout is expected to create a new growth curve.

After investing in Scenery 3D and its subsidiary to find her, in July '24, it invested in the domestic 3D content creation community and trading platform CG Model Network, with tradable 3D model assets exceeding 1 million.

Profit Forecasts, Valuations, and Ratings

We expect the company's net profit to be 0.13/0.16/0.18 billion yuan in 24-26, and the corresponding PE is 61.0/49.7/43.4X, respectively, to maintain a “buy” rating.

Risk warning

Downstream demand falls short of expectations; 3D business progress falls short of expectations; AI empowerment falls short of expectations and increases competitive risks; policy and regulatory risks.