Incidents:

The company achieved operating income of 1,743 million yuan in 2022, a year-on-year decrease of 1.21%; net loss of 283 million yuan, a year-on-year take-profit turned loss, and net profit of 42.7207 million yuan for the same period last year; basic earnings per share was -0.17 yuan.

Comment:

The digital effects traffic business grew steadily. During the AI Platform Empowerment Business Development Report period, some participating companies experienced large losses in their performance, which had a great impact on the company's investment profits and losses confirmed under equity law accounting. At the same time, the company calculated long-term equity investment impairment preparations for some participating companies, which had a certain impact on the company's overall performance. The highlight of the company's development in 2022 was that the revenue of the digital performance traffic business grew steadily in the current period, while other business revenue, mainly the Shanxi Data Traffic Ecological Park invested and operated by the company, increased dramatically.

Looking at specific businesses, in terms of the digital effects traffic business, in 2022, the company integrated superior internal and external resources to create an AI platform, and quickly created AI productivity tools such as “MetaSurfing - Yuanxiang Intelligent Cloud Platform”, “Intelligent Recommendation System for Mobile Application Distribution”, “Rubik's Cube Mix-Aigc Short Video Intelligent Marketing Assistant”, and “AI Content Marketing System” for digital marketing to advance digital marketing towards intelligent marketing. (1) Based on the “MetaSurfing - Yuanxiang Intelligent Cloud Platform”, the first Chinese style virtual digital person to go overseas with culture, “Tianyu”, has become the leading IP of virtual digital people in China and has achieved a groundbreaking record of nearly 5.5 million online fans, more than 400 million video views across the network, and more than 26 million likes on Douyin. In addition, the “MetaSurfing - Yuanxiang Intelligent Cloud Platform” uses AIGC to accelerate the construction of the personification of digital humans and the internality of intelligence. It also accesses big language models such as GPT and optimizes for different scenarios through massive data resources. It has provided services to first-line customers such as Peak, Tencent, AMD, Shanghai Aunt Du Xiaoman, Foreign Research Institute, and many other users. (2) Driven by the “Mobile App Distribution Intelligent Recommendation System”, the number of new registered users on the company's mobile application distribution platform exceeded 27 million, and the total number of registered users reached 286 million. It continued to provide promotion services for leading apps such as Douyin, Kuaishou, and Xiaohongshu.

In terms of other business, up to now, the number of enterprises invested and operated by the company in the Shanxi Data Traffic Ecological Park has exceeded 470, including 9 listed companies, 2 unicorn companies, and 12 “specialized, special and new” enterprises, covering more than 10 digital economy segments such as digital energy, digital retail, and digital agriculture. The scale of data element circulation has exceeded 2.7 billion yuan, driving enterprises entering the park to generate more than 12 billion yuan in operating income.

Investment Ratings and Profit Forecasts

The company is currently focusing on the development of its main business, and its layout in the virtual person business has entered a stage of rapid development, leaving room for the company's digital effects traffic business to further reduce costs and increase efficiency. In summary, we continue to give the company an “increase in holdings” investment rating. The company's EPS is expected to be 0.03, 0.05 and 0.09 yuan/share in 2023-2025, respectively.

Risk warning

The company's business development falls short of expectations, product operation falls short of expectations, game industry policy risks, data traffic ecosystem policy and operation risks, etc., risk of loss of goodwill, long-term investment, etc.