The company's recent situation

The company's 3Q24 revenue was 1.351 billion yuan, up 24.6% year on year; we estimated that the 3Q24 Prophet AI platform/SHIFT intelligent solution/AIGS service revenue was +34%/+7%/+11% year-on-year to 0.92/0.235/0.196 billion yuan, respectively. Gross profit was 0.56 billion yuan, up 13.1% year on year; gross margin was 4.1ppt to 41.5% year over year, which is a quarterly fluctuation and increase in hardware share. The company's 3Q24 R&D expenses were 0.523 billion yuan, and the R&D rate was 38.7%, -9.5ppt. The company did not announce profit, and loss reduction expectations for the whole year remained unchanged.

reviews

The platform business drives revenue growth, and the increase in hardware share affects gross margin fluctuations. In 3Q24, the company's revenue was +24.6% YoY to 1.351 billion yuan. In the first three quarters, the company's Prophet AI Platform/SHIFT Intelligent Solution/ AIGS service revenue was +50.2%/-14.1%/+17.0% to 2.171/0.688/0.359 billion yuan, respectively; we estimate that 3Q24 Prophet AI Platform/SHIFT Intelligent Solution/ Shifu AIGS service revenue was +34%/+7%/+11% year-on-year to 0.92/0.235/0.196 billion yuan, respectively. The company's platform business drives revenue growth. On the profit side, 3Q24's gross profit was 0.56 billion yuan, up 13.1% year on year. The month-on-month fluctuation was affected by the increase in hardware share, and the company's 3Q24 gross margin fell 4.1ppt to 41.5% year on year.

R&D investment has increased steadily, and ecological cooperation has blossomed. The company spent 0.523 billion yuan on R&D in 3Q24, and the R&D rate was 38.7%. The total number of the company's customers reached 224 in the first three quarters, of which 98 were benchmark customers. Benchmark customers achieved an average revenue of 14.87 million yuan, an increase over the average revenue of 1H24 benchmark customers of 11.48 million yuan. On the platform side, the company released Prophet AIOS 5.2 on August 29, adding a unified management model for the Model Hub platform, which is fully compatible with domestic and non-domestic servers. The company continues to optimize AI Agent and GPU resource pooling capabilities. In early November, the company collaborated with Wisdom to jointly launch RiseVast, an enterprise-level AI computing power pooling platform. In October, the company released AI Data Foundery, a diverse data set incorporating feedback from human experts, and launched a large model tool chain, which generally shortened the development cycle of enterprise developers by more than 95%. At the solution level, the company launched Smart Archive 2.0, a next-generation document digital management platform to achieve accurate identification and information extraction from corporate documents with zero samples; at the same time, it also released intelligent conference solutions to help hardware manufacturers such as communications and speakers complete intelligent upgrades.

Profit forecasting and valuation

We are optimistic about the company's ecological card position and product capabilities in the industry, and maintain the company's performance rating. Considering the accelerated implementation of the company's platform products, we raised the 2024E/2025E revenue forecast by 1.6%/2.6% to 5.25/6.28 billion yuan, adjust the 2024E net profit forecast from -3.2 to -0.29 billion yuan, consider maintaining a strategic investment pace in R&D, and adjust the 2025E net profit forecast from 0.07 to -0.13 billion yuan.

We keep our target price of 55 yuan unchanged, corresponding to 3.8 times 2025E P/S. Currently trading at 3.0 times 2025E P/S, with 25.6% upside.

risks

Technology iteration falls short of expectations; promotion of platform-based products falls short of expectations; R&D investment puts pressure on profits.