occurrences
The company released its 2023 annual report and 2024 quarterly report.
Comment:
R&D investment increased, 2023 profit distribution plan announced
In 2023, the company achieved operating income of 4.915 billion yuan, up 3.78% year on year; realized net profit of 1,258 billion yuan, up 9.15% year on year; net profit after deducting 660 million yuan, down 42.86% year on year, and the company's gross profit margin was 78.8%, maintaining a high level. During the year, the company continued to increase R&D investment. The annual R&D expenses increased to 970 million yuan, and the R&D expenditure rate was 19.69%, an increase of 5.11 pcts over the previous year. 2024Q1 achieved revenue of 1,208 billion yuan, -0.79% year-on-year, and a net loss of 187 million yuan to mother. The company announced the 2023 profit distribution plan. The company plans to distribute cash dividends of 0.5 yuan (tax included) for every 10 shares, for a total cash dividend of 60.75 million yuan.
The All in AGI strategy is progressing steadily, and continues to empower multi-business AGI and AIGC businesses. The company began focusing on big models and AIGC fields in 2020. Currently, it has built a diverse AI business matrix, and commercialization of some businesses has already been implemented. The company launched the first domestic AI search product, Tiangong AI Search, in August '23, and has accumulated tens of billions of dollars of high-quality data resources.
In April 2024, the company released China's first music SOTA model “Tiangong SkyMusic”, which for the first time realized that China's self-developed big model led the world in the AIGC vertical field. The company's self-developed AI game “ClubKoala” uses AI technology to empower users to create and provides Koala Editor, a no-code game editor. A variety of innovative AI games are also under development. The overseas information distribution and metaverse business benefited from the promotion of browser commercialization strategies and the expansion of the Opera Ads platform. 2023Q4 and Opera's ARPU reached 1.44 US dollars, an increase of 22% year over year, and achieved annual revenue of 397 million US dollars, an increase of 20% year over year. The adjusted EBITDA reached 93.719 million US dollars, an increase of 38% year over year. The company's social entertainment product, StarMaker, has been empowered through AI, and has been ranked first in the music/audio download list in 82 countries and regions.
Investment advice and profit forecasting
The company has now completed the “computing power infrastructure - big model algorithm - AI application” industry chain layout. We estimate that in 2024-2026, the company will achieve net profit of 8.31/9.29/1,012 billion yuan, EPS of 0.68/0.76/0.83, respectively, corresponding to PE of 55/50/46 times, maintaining a “gain” rating.
Risk warning
The commercialization of the model fell short of expectations; industry competition intensified; regulations became stricter, etc.