Incident Overview
On April 27, 2024, Alto Electronics released the 2023 Annual Report and the 2024 First Quarter Report. The company achieved operating income of 180 million yuan in the first quarter, an increase of 5.22% over the previous year, and net profit to mother of 6073 million yuan, a year-on-year decrease of 80.58%. According to the 2023 annual report, the company achieved annual revenue of 658 million yuan, a year-on-year decrease of 28.77%, and realized net profit of 13.7.781 million yuan, a year-on-year decrease of 34.40%. It plans to distribute 0.6 yuan (tax included) for every 10 shares.
We attach great importance to shareholder returns, and overseas business continues to grow
In 2023, the decline in the company's performance was mainly due to a decline in revenue in the domestic market and impairment of goodwill, but the company's steady operation is worth paying attention to. In particular, it attaches great importance to shareholder returns. Since its listing, it has accumulated cash dividends of about 450 million yuan, accounting for 59.84% of net profit attributable to mother. The 2023 annual report proposes a dividend of 39.026 million yuan (tax included), with a dividend rate of 283.73%. In 2023, the company's comprehensive gross margin reached 36.44%, an increase of 0.22pct over the same period last year; overseas business continued to grow for three consecutive years, with overseas revenue of 316 million yuan in 2023, an increase of 9.54% over the previous year; by the end of the first quarter, the total amount of orders and winning bids of the company was about 496 million yuan, laying the foundation for the transformation of annual performance.
AI R&D investment accounts for more than 10%. According to the annual report, Innovation Digital has launched a variety of innovative products. In 2023, Alto Electronics' R&D investment increased significantly, reaching RMB 80.9934 million, accounting for 12.31% of the company's annual revenue. The company's holding subsidiary Creative Digital has developed a “one-stop content generation solution based on AI technology” and a “Coruscant star core rendering and synthesis service system” to provide customers in the fields of live short videos, advertising, radio and television, education, commercial displays, etc., with more convenient and efficient one-stop virtual live streaming and content generation solutions. Creative Digital provides customers with technical services such as virtual live streaming, XR technical services, and digital asset generation. In 2023, we developed and launched Metabox 4KK, a miniaturized XR virtual live streaming solution, mainly to solve the “top three” problems of high technical barriers, high usage costs, and difficult asset production in the virtual live streaming field.
Assisted China Film to launch ultra-high-definition LED movie screens and undertook several virtual studio projects around the world. In 2023, China Film Group, a leading company in the domestic film and television industry, launched the world's first “China Film CINITY LED Movie Screen Projection System” supporting 4K/120 frame high format. The company has signed a “China Film CINITY LED Film Screen Batch Order Agreement” with China Film, and is working with China Film to explore a new blue ocean market for LED cinemas. As of the release of the annual report, the China Film CINITY LED movie screen projection system has been implemented in cinemas in 5 provinces/cities, and more projects are gradually being implemented. In 2023, the company undertook a total of 23 XR/VP virtual studio projects. Up to now, it has undertaken 67 XR/VP virtual studio projects worldwide, and has been successfully applied to many well-known domestic and foreign film and television production companies and the world's top 500 companies, such as Nvidia, Tencent, Microsoft, Amazon, China Film Group, Japan's Toei, and some Hollywood film and television production companies.
Investment advice
The performance performance during the reporting period was stable. We adjusted our previous profit forecast. The company is expected to achieve operating income of 7.5/8.5/940 million yuan respectively in 2024-2026 (1.72 billion yuan in the first half of 2024-2025), realized net profit of 0.5/0.8 billion yuan (2024-2025 was 17/200 million yuan), and EPS was 0.07/0.13/0.16 yuan (2024-2025 was 0.25/0.30 yuan), April The closing price on the 29th was 5.76 yuan, and the PE corresponding to the current stock price was 80/45/37 times, respectively, maintaining the “gain” rating.
Risk warning
In December 2021, the company received a decision on corrective measures ordered by the Shenzhen Securities Regulatory Bureau; industry demand recovery falls short of expected risks, order execution pace falls short of expected risks, project repayment risks, and AI technology supervision risks.