Incident: The company announced its annual report for the year 2010 and the quarterly report for 2024. In 2023, the company achieved revenue of 5.284 billion yuan, -6.54% year-on-year, net profit to mother of 528 million yuan, -28.36% year-on-year, and net profit after deducting non-return to mother of 408 million yuan, -18.76% year-on-year. 2023Q4, the company achieved revenue of 1,398 million yuan, -32.93% year on year, net profit attributable to mother of 208 million yuan, or -52.07% year-on-year, net profit after deducting non-return to mother of 93 million yuan, -64.61% year on year. 2024Q1, the company achieved revenue of 936 million yuan, +0.60% year-on-year, net profit of 49 million yuan, -65.53% year-on-year, and net profit after deducting non-return to mother of 0.48 million yuan, or -42.31% year-on-year.
Cash flow continued to improve, and financial conditions improved steadily. The company's performance in 2023 was under pressure, mainly due to external circumstances affecting advertisers' advertising budgets. The gross profit margin in 2023 was 17.70%, +1.02pcts, and the sales/management/ R&D/ finance ratio was 6.36%/1.18%/1.02%/0.55%, respectively, and +1.82pcts/+0.15pcts/+0.28pcts/+0.29pcts. Among them, the increase in sales expenses was mainly due to a year-on-year increase in the number of personnel. Accounts receivable at the end of 2023 decreased by 701 million yuan compared to the beginning of the year, -22.74%; the company's financial situation improved steadily, with the balance ratio falling from 51.06% at the beginning of the year to 40.39% at the end of the year. The balance and liability structure was further optimized, and the company's solvency capacity was further improved; the net cash flow from operating activities throughout the year changed from negative to positive, amounting to over $128 million, and the year-end monetary fund balance reached 905 million yuan, +61.99% year over year.
Continuing to increase investment in R&D, AI helps reduce costs and increase efficiency. The company continues to increase investment in technology research and development to focus on building a “One AI” marketing platform. The platform is based on the HKUST iFLY Spark model, and combined with various cutting-edge technologies such as Stable Diffusion, it can provide customers with various A marketing services such as marketing plans and creative materials. Through the “One AI” marketing platform, the company's internal business efficiency has been significantly improved. The company's digital marketing creative department uses up to 50% of AI support projects, reducing working hours and personnel costs by 30%, and the reduction in map rental costs is expected to increase from 30% to 70%, saving labor costs while responding more quickly to customer needs. In 2024, “One AI” will continue to be upgraded to create a more powerful marketing AI model through the company's many excellent cases and artificial intelligence self-training.
Investment advice: We expect the company to achieve net profit of 68/787/835 million yuan in 2024-2026, +24.72%/+19.53%/+6.09% year-on-year, corresponding to PE 10.46X/8.75X/8.25X, maintaining a “buy” rating.
Risk warning: macroeconomic downside risks, advertisers' willingness to launch falls short of expectations, and competition intensifies