24H1 revenue growth is steady, and net profit is under phased pressure

2024H1, the company's revenue was 1.321 billion yuan, +6% year over year; gross profit was 0.967 billion yuan, +8% year over year.

The increase in revenue and gross profit was mainly due to the successful application and commercialization of artificial intelligence (AI) technology. 2024H1, the company's net profit was RMB 0.143 billion, or -31% year over year. The main reason was the sharp rise in sales and marketing expenses in the first half of the year, from 0.461 billion yuan to 0.507 billion yuan in the same period last year. It was used to increase brand and business promotion to enhance the company's brand awareness and continuously obtain high-quality traffic to improve conversion efficiency. We believe that the decline in the company's net profit due to sales and marketing expenses is phased. The future will benefit from the company's investment in publicity and high-quality traffic acquisition, and revenue and net profit are expected to increase sequentially in the second half of the year.

The BaaS financial industry's cloud data is impressive, becoming the driving force for performance growth in 2024H1. The BaaS financial industry's cloud revenue was 0.589 billion yuan, +20% year over year, mainly due to the rapid rise in transaction scale facilitated: the asset transaction volume in the first half of this year was +23% to 26.15 billion yuan.

2024H1 deepens cooperation between the company and customers, and jointly explores various marketing activities to facilitate the rapid expansion of the scale of asset transactions; in addition, as more self-owned users contribute revenue, combined with the company's customer acquisition advantages in generative AI, it continues to improve customer acquisition efficiency and bring a higher level of ROI. We believe that the company's outstanding data on the BaaS financial industry cloud, which is its core business, may drive the company's performance to continue to improve in the future.

Technology continues to be updated to help the company continue to be profitable

With 2024H1, the company successfully combined intelligent voice applications with a large model, reducing the interaction delay based entirely on the large model to less than 500 ms, which is less than 1 second in the industry; at the same time, through pure self-research, the company's large intelligent voice model further iterated on functions that support emotion recognition and emotional voice output. For the future long-term layout, the company's large model further enriches modal support. Combined with 3D digital human intelligent voice interaction hardware, the first commercial version has been developed, and intentions have been communicated with customers, and it can be widely used in various application scenarios such as bank lobby reception and retail department store shopping guides.

We believe that the company's continuous technical updates can lead the company's technology ahead of its peers, thereby obtaining steady revenue and helping to grow performance in the future.

Investment advice

Considering the year-on-year decline in net profit in 2024H1, the MaaS business and the BaaS insurance industry's cloud business are under phased pressure, so we adjusted FY2024-FY2026's total revenue of 3.08/3.7/4.34 billion yuan to 3/3.43/4.05 billion yuan, and adjusted net profit to mother of 0.39/0.53/0.58 billion yuan to 0.319/0.381/0.438 billion yuan, maintaining the “buy” rating.

Risk warning: The liquidity of the Hong Kong stock market falls short of expectations, the development and application of AI technology falls short of expectations, macroeconomic recovery falls short of expectations, the company's cost control falls short of expectations, risk of differences in valuation systems, risks related to data confidentiality and law, risk of not being able to renew a company license