Core views

1. The company's core business revenue is growing rapidly. The company achieved revenue of 3.218 billion yuan in the first three quarters, up 26.1% year on year, and achieved gross profit of 1.35 billion yuan, up 12.5% year on year. Among them, the core business “Prophet AI Platform” achieved revenue of 2.171 billion yuan, an increase of 50.2% year on year, accounting for more than 67% of total revenue.

2. According to IDC reports, the company has consistently ranked first in the market share of machine learning platforms in China for six consecutive years. In addition to the Prophet platform, the company has continuously optimized many key skills such as AI Agent and GPU resource pooling, and has efficiently built more than 40 artificial intelligence products.

3. The average revenue of the company's benchmark customers was 14.87 million yuan, and the number of benchmark users was 98, accounting for 44% of the total number. The commercialization process of the company's industry model is accelerating, continuing to build benchmark customers and solutions for the financial, energy, operator, medical, transportation, manufacturing and other industries, constructing industry models based on different modal data in various industry scenarios, and expanding the application fields of the big industry model.

occurrences

The company released financial reports. The company achieved revenue of 3.218 billion yuan in the first three quarters, up 26.1% year on year, and achieved gross profit of 1.35 billion yuan, up 12.5% year on year. Among them, the core business “Prophet AI Platform” achieved revenue of 2.171 billion yuan, an increase of 50.2% year on year, accounting for more than 67% of total revenue.

Brief review

1. Core business revenue is growing rapidly, and R&D investment remains high

The company achieved revenue of 3.218 billion yuan in the first three quarters, up 26.1% year on year, and realized gross profit of 1.35 billion yuan, up 12.5% year on year. The gross margin was 41.96%. Compared with the 24h1 decline of -0.42pct, it remained stable. It may mainly be affected by seasonal and phased changes in the industry's business structure. The core business “Prophet AI Platform” achieved revenue of 2.171 billion yuan, a year-on-year increase of 50.2%, accounting for more than 67.5% of the Group's total revenue. The company spent 1.373 billion yuan on R&D in the first three quarters, with an expense ratio of 42.7%. The company's Prophet AI platform 5.0 has achieved the capacity supply of computing power, models, and platforms, driving the growth of core business revenue.

2. Iterative upgrade of the Prophet AI platform and efficient expansion of core business

The company's core business is mainly divided into three segments, namely the Prophet AI Platform, SHIFT Intelligent Solutions, and Sonic AIGS Services. In the first three quarters of 2024, the revenue of the Prophet AI platform was 2.171 billion yuan, an increase of 50.2%, accounting for 67.5% of total revenue; the revenue of the SHIFT intelligent solution was 6.80.8 billion yuan, down 14.1% year on year, accounting for 21.4% of total revenue; according to the formula, AIGS service revenue was 0.359 billion yuan, up 17.05% year on year, accounting for 11.1% of total revenue.

The Seer AI platform is the company's core product. It is committed to using digital intelligent transformation to improve the core efficiency of the enterprise, solve core needs such as improving enterprise competitiveness, and create a basic model exclusive to customers. At the end of March 2024, the company released the industry-leading model product “Prophet AI Platform 5.0,” which achieved the fifth upgrade of this product. Currently, “Prophet AI Platform 5.0” has achieved end-to-end capacity supply such as computing power layer, platform layer, model layer, and application layer, and continuously optimizes many key capabilities such as AI Agent and GPU resource pooling. Among them, AI Agent further improves the accuracy of solving complex reasoning and execution, and covers the entire process of large model Agent design, development, debugging, release, operation analysis, and iterative optimization, providing a stable and reliable guarantee for Agen T production applications. GPU resource pooling capabilities can help enterprises achieve platform-based management of hardware clusters, on-demand allocation and rapid scheduling of computing power resources, and help solve the problems of low utilization of heterogeneous computing power resources and high cost of matching large models with large models.

The SHIFT intelligent solution is an intelligent solution product provided by the company for various industries, and it is also an extension of the Prophet AI platform business on the solution side. In the first three quarters, the company announced dozens of solution products for the financial, retail, manufacturing, energy and other industries. Through the model ecosystem, the company further penetrated the industry and scenarios, driven the customer's core business value increase, and promoted the digital and intelligent transformation of the industry.

The AIGS service empowers software development through generative AI technology to provide efficient development tools and services for the Prophet AI platform. In the first three quarters, the company's auxiliary programming tool product AIGS Code X completed product function upgrades and breakthroughs in model effects, and the user experience and product capabilities were greatly improved. In terms of programming development, the company has cooperated with many leading companies such as finance, operators, and new energy vehicle companies to create enterprise-level development assistants that understand customers, business, and knowledge.

3. Benchmark customers contributed to high-quality growth. The customer base was becoming more and more diverse. The total number of company users during the first three quarters of 24 was 224, and the number of benchmark users was 98, mainly global Fortune 500 companies or listed companies. The average revenue contribution of the benchmark user group was 14.87 million yuan. The company continues to cultivate in key industries such as finance, energy and electricity, transportation, operators, etc., and is strengthening its penetration in strategic fields such as manufacturing, medical care, and retail. While expanding new users, the company has also upgraded the digital experience of existing customers and increased product stickiness.

4. Application of large industry models in multiple scenarios, acceleration of commercialization process

In terms of commercialization, the company and benchmark users have jointly created a number of exemplary industry models to accelerate the large-scale application of artificial intelligence technology in various industries. In the field of transportation, the company cooperated with the world's largest port group to establish a large model of the port supply chain, providing an intelligent integrated service transformation for the Hong Kong port. Furthermore, it has promoted the sustainable development of large-scale models in the field of port and shipping. In the field of academic translation, the company and Hyundai Press have jointly built the first large-scale publishing model in China, so that the level of machine translation has reached the publishing level, and BLEU (an index that measures the quality of machine translation) has been increased by more than 30% in specific types of books, meeting the needs of high-accuracy translation in the academic vertical field.

5. Profit forecast

As an enterprise-level AI leader, the company's revenue has continued to rise in recent years, net losses have continued to narrow, and the profit model has become more and more clear. The number of benchmark customers and revenue grew steadily, and the downstream industry expanded smoothly. The big model and AIGS service platform launched in 2023 have opened up the market space for generative AI for the company. With enterprise-level data, pain points, and strong software capabilities, it is expected that it will continue to increase its share in the future. The company's revenue for 2024-2026 is expected to be 54.10, 66.91 and 8.086 billion yuan, respectively, with year-on-year growth rates of 28.68%, 23.67%, and 20.86%, respectively. The corresponding 2024-2026 PS is 3.23x, 2.6x2, and 2.16x, respectively. The company's net profit for 2023-2025 is expected to be -3.13, -0.40, and 314 million yuan, respectively, with year-on-year growth rates of 65.55%, 87.20% and 883.81%, respectively. Considering the company's AI platformization capabilities and growth, the proportion of high-quality downstream customers is high, and technology is deeply accumulated. Refer to the valuation of comparable overseas companies to maintain a “buy” rating.

Risk analysis

1. Technical risk: Artificial intelligence technology is rapidly updated and requires continuous investment in R&D to maintain competitiveness. New technology research and development is insufficient, and there is a risk that the market will be eliminated.

2. Market competition risk: Increased competition in the artificial intelligence market may affect market share and profits.

3. Project management risks: Artificial intelligence projects have a long implementation cycle and high complexity. Poor project management may cause problems such as project delays and cost overruns.

4. Downstream uncertainty risk: Changes or uncertainty in customer demand may lead to expansion of project scope or budget overexpenditure, which will have a negative impact on return on investment.

5. Revenue falls short of expectations: The scale effect of the company's platform business is an important assumption to support the continued growth of the company's subsequent revenue. If the expansion of the platform business falls short of expectations, it will cause the company's revenue growth rate to decline.