occurrences

The company released its 2023 annual report and 2024 quarterly report.

Comment:

Focusing on the core business, the audio and video business achieved rapid growth

In 2023, the company achieved operating income of 781 million yuan, an increase of 11.94% over the previous year; achieved net profit of 146 million yuan, an increase of 48.14% over the previous year; and realized net profit of 109 million yuan after deduction, an increase of 12.22% over the previous year. 2024Q1 achieved revenue of 175 million yuan in a single quarter, up 32.35% year on year; net profit after deducting non-return to mother was 0.16 million yuan, up 88.35% year on year, and net cash flow from Q1 operating activities was 18.56 million yuan, up 12.12% year on year. In 2023, the company further acquired 31.6% of Guangchang Creative's shares, with a shareholding ratio of 61.6%, becoming the controlling shareholder of Guangchang Creative. Currently, the company's audio and video content materials are close to 30 million, of which the cumulative length of video material exceeds 800,000 hours. The audio and video business sales ratio increased from 6% in 2022 to 26% in 2023.

Deepening the “AI+ Content+Scenario” strategy, Visual+ Services continued to explore the C-side market in 2023. The company's visual content and service business achieved revenue of 780 million yuan, an increase of 12.15% over the previous year.

The company fully covers the market through platform-based product services. Based on the digital copyright trading platform vcg.com, the company leverages the advantages of all categories of content. Major KA customers continue to maintain high stickiness, and the renewal rate for Changxie customers with annual sales of 100,000 yuan or more remains 80%. At the same time, it provides standardized e-commerce products with efficient self-service, expanding the market share of small and medium-sized enterprises and C-end users. The share of e-commerce platform sales increased to 23%, an increase of 22 pcts over 2022. The company has established a “AI+ content+scenario” development strategy and uses AIGC technology to continuously empower the main business. The company has a total of 3 million structured labels and industry knowledge maps. Based on high-quality copyright data, the company has initially completed the development of multi-modal visual Chinese models, and launched multiple functions such as AI intelligent search and inspiration drawing. Cooperation has also been reached with major models such as Baidu Wenxin Yiyan and Huawei Pangu to expand commercial monetization models. In addition, the company has built a creator community, consolidated the core advantages of the content ecosystem, served more than 34 million registered users through the creator community, more than 550,000 signed contributors worldwide, and established close cooperative relationships with nearly 300 professional copyright and media organizations at home and abroad.

Investment advice and profit forecasting

The company has consolidated the core business of digital copyright business, the audio and video business has developed rapidly, and AI+ services are expected to continue to enable business monetization and new growth. In 2024-2026, we expect the company's net profit to be 168/1.93/212 million yuan, and EPS 0.24/0.28/0.30 yuan, respectively, corresponding to PE53/46/42 times PE. Maintain an “Overweight” rating.

Risk warning

Policy and regulatory risks, risk of new business development falling short of expectations, and increased risk of industry competition.