The company's overall operating performance in 2023 was under pressure, the company's strategy was upgraded, and Q1 revenue in 2024 began to recover.
In 2023, it achieved operating income of 5.242 billion yuan (-3.73%), net profit attributable to mother of 466 million yuan (-39.36%), net profit after deducting non-return to mother 340 million yuan (-49.62%), and net operating cash flow of 755 million yuan (+51.89%).
In Q1 2024, we achieved revenue of 1,178 billion yuan (+1.01%), net profit attributable to mother of 91 million yuan (-46.10%), net profit after deducting non-return to mother of 85 million yuan (-46.23%), and net operating cash flow of 164 million yuan (-50.21%).
In terms of gross margin, it was 36.95% (-2.34%) in 2023 and 39.82% (-1.0%) in the first quarter of 2024.
The Smart to Intelligent strategy upgrade was launched in 2023, with R&D investment of 1,458 million yuan in 2023 and 252 million yuan in the first quarter of 2024. After a strategic transformation, the company has made key progress in the development of vehicle operating systems and industrial robot products, and 2024 will enter a return on investment period.
The OS+AI strategy deepens end-side applications, and the era of central computing is fully opened. The “OS+AI Strategy” continues to be deepened, end-side application results are beginning to emerge, promoting the upgrading of the automotive industry, and the core value of software is becoming more prominent. With its OS products and technical advantages in the cockpit to driving field, it invested in the development of HPC products integrating vehicle operating systems and cabin driving, and released the “Drip Water OS” vehicle operating system. In January 2024, the company released E-Cockpit 8.0, a next-generation “cockpit+AI” solution to promote a “software-defined” technology architecture for smart cockpits. In April, the company launched the Kanzi One product to empower the BYD Equation Panther 5 to create the ultimate HMI visual inspiration. The AIPC wave has brought new opportunities. China Science and Technology Chuangda has significant advantages in end-side AI applications. Long-term cooperation with Qualcomm makes it have extensive chip support in the fields of smartphones and smart cars. The co-founded Thundercomm is committed to AI end-side application research and development, and occupies an advantageous position in the market. The end-side AI market will become more competitive as AI advances. Zhongke Chuangda has deep experience in AI+ application product development, covering software development and a full-stack product line of hardware AI chips. It is expected to explore more opportunities in the field of terminal-side intelligence and enhance market competitiveness.
The smart car business is growing strongly, and smart driving is generating revenue. The company has successively established joint ventures with Volkswagen CARIAD, became a strategic partner with Mazda, put into operation the Intelligent Connected Vehicle Innovation Center jointly established with Qualcomm, and continued to implement major customer strategies. At the same time, the company is working hard to establish overseas ecological alliances, strive to develop overseas markets, and continue to strive to become a global leader in smart car software. In 2023, the company's smart car business achieved revenue of 2,337 billion yuan, an increase of 30.34% over the previous year. Among them, the revenue of intelligent driving software reached 182 million yuan, making a historic breakthrough.
Risk warning: The downstream market is uncertain; there is a risk of bad debts in accounts receivable.
Investment advice: Maintain an “better than the market” rating. The estimated net profit for 2024-2026 is 676/9.19/1,172 million yuan, corresponding to current PE 38/28/22 times. Considering that the company's effectiveness in coping with the downturn in the economy is remarkable, and human efficiency continues to improve, it is expected to gradually reverse in 24, maintaining the “superior to the market” rating.