Description of the event
Zhongke Chuangda released its report for the first quarter of 2024. In Q1 of 2024, the company achieved operating income of 1,178 billion yuan, a year-on-year increase of 1.01%; realized net profit due to mother of 0.91 million yuan, a year-on-year decrease of 46.10%; realized net profit deducted from non-return to mother of 85 million yuan, a year-on-year decrease of 46.23%; and achieved net operating cash flow of 164 million yuan, a year-on-year decrease of 50.21%.
Incident comments
Increased investment in R&D has put pressure on the profit side, and forward-looking energy is only waiting to blossom. The company achieved net profit of 91 million yuan in Q1 2024, a year-on-year decrease of 46.10%. The gross sales margin for Q1 2024 was 39.82%, a month-on-month improvement, with a year-on-year decrease of 1.01pct, which is basically stable; the net sales margin was 6.76%, a year-on-year decrease of 7.55pct, mainly due to increased R&D investment. The R&D expenses in Q1 2024 were 255 million yuan, up 32.79% year on year; R&D expenses increased from 16.26% in Q1 2023 to 21.37% in Q1 2024, up 5.11 pcts year on year.
Firmly lay out end-side intelligence, and with superior card positions, it is expected to open up a new round of growth curve. In the smart software business, AI PCs and AI phones are expected to bring new momentum for growth. In November 2023, the company successfully achieved stable operation of the lLAMA-213 billion parameter model on edge devices of the Qualcomm 8 series chip platform; in March 2024, Chuangda released a commercial AI PC Rubik's Cube intelligent legal assistant solution equipped with an Intel Core Ultra processor. In terms of smart cars, smart cockpits continue to grow, and vehicle operating systems and smart driving domain control are further accelerating growth. On April 26, 2024, the company launched the world's first AI native vehicle operating system for central computing, Dishui OS, at the Beijing International Auto Show. It aims to empower the automotive industry to embrace AI models and accelerate the implementation of automakers' internationalization strategies. In terms of smart driving domain control, a new integrated domain control solution for single SoC cabin driving, RazorDCX Tarkine, was released, and smart driving domain control is expected to achieve a fixed breakthrough. In terms of the intelligent IoT business, in September 2023, the company established the robot team Xiaowu Intelligence to comprehensively lay out mobile robots (AMR, unmanned forklifts, multi-joint composite robots) in the industrial field, which is expected to become a new driving force for the growth of the IoT business.
We believe that the company is the world's leading operating system service provider. It is on an intelligent racetrack. The business layout is in line with the trend of industrial value growth shifting from the cloud to the edge side. With its settled software platformization capabilities, it is expected to enjoy every round of intelligent terminal opportunities. The global layout of the big model AI+OS will also bring new development opportunities to the company. It is estimated that in 2024-2026, the company will achieve net profit of 5.97/7.64 billion yuan, corresponding to PE 36/28/21 times, and maintain a “buy” rating.
Risk warning
1. Downstream demand in the field of IoT falls short of expectations;
2. The intelligent development of automobiles fell short of expectations;
3. Product development progress falls short of expectations.