Summary of Conference Call Records Company/Industry Involved - The records primarily discuss a technology company focused on AI and enterprise services, particularly in sectors like finance and energy. Key Points and Arguments Revenue Growth and Client Engagement - The company reported a revenue increase of 104% year-over-year, indicating strong client engagement with 104 clients contributing to this growth. The revenue from these clients grew from 100 to 115, reflecting increased investment in the company's services [1] - The average annual revenue growth is approximately 2 billion, with a growth rate close to 12-15% [1] Industry Insights - Key industries mentioned include education, media, and energy, with significant growth potential in these sectors. The company aims to leverage its position within these industries to drive further growth [2] AI Product Development - The company has developed a public AI product, evolving through five versions over ten years, aimed at simplifying the AI modeling process for enterprises [3][4] - The AI modeling process has been automated, allowing even non-experts to engage in model training, significantly reducing the time required for data preparation and project implementation [5][6] Market Dynamics and Client Needs - The company emphasizes the importance of understanding client needs and providing tailored solutions, particularly in the banking sector, where different banks have unique advantages and requirements [7][16] - The company is focused on enhancing client interaction and experience through AI-driven solutions, aiming to improve operational efficiency and predictive capabilities [11][16] Competitive Landscape - The company differentiates itself from competitors by offering not just models but comprehensive solutions tailored to client needs, emphasizing the importance of data-driven decision-making [23][24] - The company acknowledges the presence of large competitors like Huawei and BAT but asserts that its approach to AI service delivery is distinct and focused on enterprise-specific applications [23][24] Financial Performance and Projections - The company anticipates continued revenue growth, with a significant increase in project volume correlating with higher computational power consumption. The revenue growth is expected to outpace average industry growth rates [27][28] - The company is cautious about mergers and acquisitions, preferring to focus on organic growth and strengthening existing client relationships [22] Challenges and Future Outlook - Despite the positive outlook, the company recognizes that the adoption of AI in enterprises is slower than anticipated, with a need for ongoing education and support for clients to fully leverage AI capabilities [29] - The company plans to maintain a stable R&D investment while focusing on enhancing its AI platform and expanding its service offerings [34] Other Important but Overlooked Content - The company is exploring the integration of generative models and diverse data types into its AI solutions, aiming to provide more comprehensive insights to clients [12][13] - There is a focus on standardizing solutions to improve scalability and efficiency in service delivery, which is seen as crucial for maintaining competitive advantage [36][37] - The company is also addressing the need for better data management practices among clients to facilitate smoother AI implementation [32][33]

Investment Rating and Target Price - The report maintains a "Buy" rating for Fourth Paradigm (6682 HK) with a target price of HKD 61.33 [4][7] - The target price is based on a 4.3x 2025E PS multiple, reflecting the company's broad industry coverage and large enterprise client base [4] Financial Performance - Fourth Paradigm reported revenue of RMB 3.22 billion for the first three quarters of 2024, a 26.1% YoY increase, with gross profit of RMB 1.35 billion and a gross margin of 42.0% [1] - In 3Q24, revenue reached RMB 1.35 billion (+24.7% YoY), with gross profit of RMB 560 million (+13% YoY) and a gross margin of 41.4% [1] - The company's revenue growth is primarily driven by its Prophet AI platform, which contributed RMB 920 million in 3Q24, accounting for 68.1% of total revenue [2] Business Highlights - Fourth Paradigm continues to expand its presence in key industries such as transportation, energy, finance, and telecommunications, with a total of 244 users, including 98 benchmark users [3] - The company has developed the Prophet AI Platform 5.0, which offers end-to-end capabilities in computing power, model layers, and application layers, enhancing AI Agent and GPU resource pooling capabilities [3] - Fourth Paradigm has collaborated with ecosystem partners to launch over 40 AI products using the "Prophet Inside" model [3] Future Outlook - The report forecasts revenue of RMB 5.0 billion, RMB 6.0 billion, and RMB 7.18 billion for 2024E, 2025E, and 2026E, respectively, representing a 19-20% YoY growth [4] - Net profit is expected to improve significantly, with forecasts of RMB -380 million, RMB -120 million, and RMB 120 million for 2024E, 2025E, and 2026E, respectively [4] Valuation and Peer Comparison - The company's 2025E PS multiple of 4.3x is higher than the peer average of 3.9x, reflecting its strong market position and growth potential [4] - Fourth Paradigm's valuation metrics, including PE and PB ratios, are expected to improve as profitability increases in the coming years [6]

Financial Performance - Total revenue for the first half of 2024 reached RMB 1.87 billion, a year-on-year increase of 27.1%[7] - Gross profit for the first half of 2024 was RMB 789.9 million, up 12.1% year-on-year[7] - Adjusted net loss for the first half of 2024 was RMB 168.5 million, narrowing by 4.0% year-on-year[7] - Revenue from the core business "4Paradigm Prophet AI Platform" reached RMB 1.25 billion, a year-on-year increase of 65.4%[7] - The company's gross margin for the first half of 2024 was 42.3%[7] - Fourth Paradigm Sage AI platform revenue reached RMB 1.251 billion, a year-on-year increase of 65.4%, accounting for 67.0% of the company's total revenue[8] - SHIFT intelligent solutions revenue was RMB 453 million, accounting for 24.3% of total revenue, but decreased by 22.1% year-on-year due to strategic focus on the Sage AI platform[10] - AIGS service revenue increased by 25.0% year-on-year to RMB 163 million, providing generative AI tools and services for the Sage AI platform[11] - Total revenue for the first half of 2024 increased by 27.1% year-over-year to RMB 1,866.6 million[14] - Core business, the Prophet AI platform, generated RMB 1,250.5 million in revenue, accounting for 67.0% of total revenue, with a year-over-year growth of 65.4%[15][17] - SHIFT intelligent solutions revenue decreased by 22.1% year-over-year to RMB 452.9 million[15][18] - AIGS services revenue increased by 25.0% year-over-year to RMB 163.1 million[15][19] - Gross profit increased by 12.1% year-over-year to RMB 789.9 million, while gross margin decreased from 48.0% to 42.3%[21] - R&D expenses increased by 28.4% year-over-year to RMB 850.0 million[24] - Operating loss decreased by 25.2% year-over-year to RMB 189.1 million[28] - Financial income increased by 33.9% year-over-year to RMB 28.6 million[28] - Other income increased significantly to RMB 77.0 million, primarily due to higher VAT refunds[26] - Other net gains increased by 39.8% year-over-year to RMB 54.2 million, mainly due to gains from the sale of a portion of Guangzhou Jianxin's equity[27] - The company's loss for the period was RMB 168.5 million, a decrease of 64.7% compared to RMB 477.7 million in the same period last year[30] - Adjusted loss for the period was RMB 168.5 million, a decrease of 4.0% compared to RMB 175.5 million in the same period last year[33] - Revenue for the six months ended June 30, 2024, increased to RMB 1,866,600 thousand, up 27.1% from RMB 1,468,104 thousand in the same period in 2023[80] - Gross profit for the six months ended June 30, 2024, was RMB 789,946 thousand, compared to RMB 704,581 thousand in the same period in 2023, reflecting a 12.1% increase[80] - Operating loss for the six months ended June 30, 2024, improved to RMB 189,120 thousand, down from RMB 252,953 thousand in the same period in 2023[80] - Net loss for the six months ended June 30, 2024, was RMB 168,532 thousand, a significant improvement from the net loss of RMB 477,678 thousand in the same period in 2023[80] - R&D expenses for the six months ended June 30, 2024, increased to RMB 850,045 thousand, up 28.4% from RMB 661,832 thousand in the same period in 2023[80] - Basic and diluted loss per share improved to RMB 0.33 in 2024 from RMB 1.66 in 2023, reflecting a reduction in net loss[115] R&D and Innovation - R&D expenses for the first half of 2024 were RMB 850 million, with an R&D expense ratio of 45.5%[7] - The company developed over 30 AI products for various industries in the first half of 2024[7] - The company launched over 30 AI products based on the Sage AI platform, covering more than 20 industries and various scenarios as of August 1, 2024[12] - The Sage AI platform 5.0, launched in March 2024, focuses on industry-specific large model development and management, supporting multimodal data and low-threshold modeling tools[8] - The "Sage Inside" model has been used to create an AI product matrix, enabling AI technology to empower various industries and scenarios[8] - The company's product matrix includes computing power, data, model tools, and ecosystem applications, expanding partnerships and industry coverage[12] - The company developed a smart flood prevention model in collaboration with a water conservancy unit, improving decision-making efficiency by 5 times[13] - The flood prevention model reduces warning and response time to minutes, enhancing real-time monitoring and resource allocation[13] - The company's AI-related technologies include AI-generated software (AIGS), AIoT, and enterprise-level AI solutions[181] - The company's AI platform-centric approach integrates AI applications, underlying computing infrastructure, and AI development platforms[181] - The company's AI technologies are focused on machine learning algorithms and statistical models for specific tasks without explicit programming[181] - The company's cloud computing strategy involves storing computer data and programs on multiple servers accessible via the internet[181] - The company's AIoT combines IoT connectivity with data-driven knowledge from AI[181] - The company's enterprise-level AI solutions aim to meet business needs and drive digital and automation transformation[181] - The company's AI development platform supports AI applications and underlying computing infrastructure[181] Market and Industry Coverage - The company covered 14 industries with a total of 185 users, including 86 benchmark users[7] - Average revenue contribution from benchmark users was RMB 11.48 million, up 26.9% year-on-year[7] - The company has cumulatively served 1,112 users from January 1, 2020, to June 30, 2024[7] - The Sage AI platform has expanded to cover 14 major industries, including transportation, finance, energy, and retail, supporting multi-scenario digital transformation[8] - Revenue from one external customer accounted for approximately 18.0% of the company's total revenue, amounting to RMB 335,632,000 for the six months ended June 30, 2024[104] - Customer contract revenue from the sale of the Prophet platform and products was RMB 1,252,055,000 for the six months ended June 30, 2024, compared to RMB 755,956,000 for the same period in 2023[104] - Revenue from application development and other services was RMB 614,545,000 for the six months ended June 30, 2024, compared to RMB 712,148,000 for the same period in 2023[104] Investments and Financial Position - The company's cash and cash equivalents and term deposits totaled approximately RMB 2,253.2 million as of June 30, 2024, compared to RMB 2,675.0 million as of December 31, 2023[35] - The company's liquid cash resources amounted to approximately RMB 2,778.0 million as of June 30, 2024, compared to RMB 3,295.3 million as of December 31, 2023[36] - The company's net current assets decreased from RMB 4,013.4 million as of December 31, 2023, to RMB 3,460.2 million as of June 30, 2024[37] - The company's current ratio increased to 3.5 as of June 30, 2024, from 3.4 as of December 31, 2023[38] - The company's capital gearing ratio decreased to 0.7% as of June 30, 2024, from 2.0% as of December 31, 2023[39] - The company's capital commitments for equity amounted to RMB 12.0 million as of June 30, 2024, unchanged from December 31, 2023[40] - The company had no significant contingent liabilities as of June 30, 2024[40] - The company invested RMB 390 million in the Gaoteng Overseas Equity No. 3 Private Equity Fund, which accounted for approximately 5.9% of the group's total assets as of June 30, 2024[46][47] - The company acquired a 22% stake in Guangzhou Jianxin Technology Co., Ltd. for RMB 88 million[45] - The company's investment in the Gaoteng Overseas Equity No. 3 Private Equity Fund generated a dividend income of RMB 10.341 million in the first half of 2024[48] - The company completed the conversion of 131,549,046 domestic shares into H shares, which were listed on the Hong Kong Stock Exchange on September 13, 2024[51] - The company adopted a stock incentive plan and a share option plan, which were approved by the shareholders' meeting on September 19, 2024[52] - The company manages idle cash by purchasing and redeeming low-risk wealth management products issued by state-owned or high-credit banks[44] - The company maintains a strong cash position and a robust debt structure, with a comprehensive and professional review mechanism for annual and monthly capital planning[44] - The company repurchased a total of 259,800 H shares during the reporting period, with a total consideration of HKD 13,707,920 (excluding fees)[58] - As of the reporting date, the company holds 186,100 H shares that have been repurchased but not canceled, and 193,300 H shares held as treasury shares for potential employee incentives or liquidity purposes[60] - The net proceeds from the global offering amounted to approximately HKD 925.6 million, with HKD 117.6 million utilized as of June 30, 2024, and the remaining HKD 807.8 million to be used according to the prospectus[62] - 60% of the net proceeds from the global offering, amounting to HKD 555.4 million, have been allocated to strengthening the company's foundational research, technological capabilities, and solution development[63] - 20% of the net proceeds, totaling HKD 185.1 million, are designated for expanding the company's product offerings, building its brand, and entering new industry sectors[63] - 10% of the net proceeds, amounting to HKD 92.6 million, are reserved for strategic investments and acquisition opportunities[63] - 10% of the net proceeds, totaling HKD 92.6 million, are allocated for general corporate purposes[63] - The total net proceeds from the global offering amount to HKD 925.6 million, with HKD 807.8 million remaining unused as of June 30, 2024[63] - The company plans to fully utilize the remaining net proceeds according to the disclosed purposes and expected implementation timeline in the prospectus[64] - The company's audit committee reviewed the unaudited interim financial information for the six months ended June 30, 2024, and confirmed compliance with applicable accounting standards, laws, and regulations[56] - The company's independent auditor, PricewaterhouseCoopers, conducted a review of the interim financial information for the six months ended June 30, 2024, in accordance with International Standard on Review Engagements 2410[57] - Total assets as of June 30, 2024, were RMB 6,619,933 thousand, a decrease from RMB 7,147,274 thousand as of December 31, 2023[82] - Cash and cash equivalents as of June 30, 2024, were RMB 1,181,736 thousand, down from RMB 1,977,891 thousand as of December 31, 2023[82] - The company's equity attributable to owners of the company as of June 30, 2024, was RMB 5,180,053 thousand, compared to RMB 5,349,122 thousand as of December 31, 2023[82] - Non-current assets as of June 30, 2024, increased to RMB 1,756,377 thousand, up from RMB 1,490,748 thousand as of December 31, 2023[82] - The company's total equity and liabilities as of June 30, 2024, were RMB 6,619,933 thousand, down from RMB 7,147,274 thousand as of December 31, 2023[82] - Total liabilities decreased to RMB 1,416,306 thousand as of June 30, 2024, compared to RMB 1,694,760 thousand as of December 31, 2023[83] - Trade payables decreased to RMB 1,024,553 thousand as of June 30, 2024, from RMB 1,043,189 thousand as of December 31, 2023[83] - The company's total equity decreased to RMB 5,203,627 thousand as of June 30, 2024, from RMB 5,452,514 thousand as of January 1, 2024[84] - Net cash used in operating activities was RMB 402,193 thousand for the six months ended June 30, 2024, compared to RMB 863,282 thousand for the same period in 2023[86] - Net cash used in investing activities was RMB 385,497 thousand for the six months ended June 30, 2024, compared to net cash generated of RMB 1,175,511 thousand for the same period in 2023[86] - The company's accumulated losses increased to RMB 5,237,973 thousand as of June 30, 2024, from RMB 5,086,375 thousand as of January 1, 2024[84] - The company repurchased shares worth RMB 12,495 thousand during the six months ended June 30, 2024[84] - The company's non-current liabilities decreased to RMB 12,979 thousand as of June 30, 2024, from RMB 51,610 thousand as of December 31, 2023[83] - The company's current liabilities decreased to RMB 1,403,327 thousand as of June 30, 2024, from RMB 1,643,150 thousand as of December 31, 2023[83] - The company's total equity and liabilities decreased to RMB 6,619,933 thousand as of June 30, 2024, from RMB 7,147,274 thousand as of December 31, 2023[83] - Net cash used in financing activities was RMB 12,014 thousand, a significant improvement from RMB 76,534 thousand in the same period last year[87] - Cash and cash equivalents decreased by RMB 799,704 thousand, compared to an increase of RMB 235,695 thousand in the same period last year[87] - The company's total financial assets measured at fair value were RMB 1,022,999 thousand, with RMB 500,636 thousand in long-term investments and RMB 522,363 thousand in short-term investments[94] - Long-term investments measured at fair value increased by RMB 43,812 thousand, from RMB 456,824 thousand at the end of 2023 to RMB 500,636 thousand at the end of June 2024[94][97] - Short-term investments measured at fair value decreased by RMB 39,972 thousand, from RMB 562,335 thousand at the end of 2023 to RMB 522,363 thousand at the end of June 2024[94][96] - The company received RMB 42,300 thousand from borrowings and repaid RMB 33,950 thousand, resulting in a net borrowing of RMB 8,350 thousand[87] - Shareholder contributions were zero in 2024, compared to RMB 194,666 thousand in 2023[87] - The company paid RMB 12,495 thousand for share repurchases, significantly lower than the RMB 259,022 thousand paid in 2023[87] - The company received RMB 8,500 thousand from related party advances, compared to zero in 2023[87] - The company's cash and cash equivalents at the end of June 2024 were RMB 1,181,736 thousand, down from RMB 1,977,891 thousand at the beginning of the period[87] - The fair value of long-term investments measured at fair value through profit or loss was RMB 500,636,000 as of June 30, 2024, compared to RMB 456,824,000 as of December 31, 2023[102] - The fair value of short-term investments measured at fair value through profit or loss was RMB 522,363,000 as of June 30, 2024, compared to RMB 562,335,000 as of December 31, 2023[102] - Contract liabilities amounted to RMB 161,702,000 as of June 30, 2024, compared to RMB 146,184,000 as of December 31, 2023[106] - Government grants and VAT refunds contributed RMB 76,976,000 to other income for the six months ended June 30, 2024, compared to RMB 33,823,000 for the same period in 2023[107] - The company's contract assets amounted to RMB 19,972,000 as of June 30, 2024, compared to RMB 63,377,000 as of December 31, 2023[105] - The company's unrealized net gains for the six months ended June 30, 2024, were RMB 16,867,000, compared to RMB 10,561,000 for the same period in 2023[99] - Other net income increased to RMB 54,164 thousand in 2024 from RMB 38,755 thousand in 2023, driven by gains from fair value changes in financial assets and partial disposal of subsidiaries[108] - Employee benefit expenses decreased to RMB 254,007 thousand in 2024 from RMB 321,289 thousand in 2023, reflecting cost optimization efforts[108] - Technology service fees increased to RMB 1,032

Investment Rating - The report assigns an "Outperform" rating to the company, indicating an expectation of better performance compared to the market [4]. Core Insights - The company is leveraging its "Prophet Inside Model" to facilitate the application of AI across various industries, having evolved its AI platform from version 1.0 to 5.0 over ten years. As of H1 2024, the platform supports 14 major industries, including transportation, data centers, finance, and energy [4][6]. - The company has developed over 30 AI products that cover more than 20 industries, focusing on areas such as academic translation, health management, and supply chain solutions [4][6]. - The introduction of the "Prophet AIOS 5.1" version enhances GPU resource pooling capabilities, significantly improving hardware cost efficiency and GPU utilization [7]. Financial Summary - Revenue is projected to grow from 4,204 million in 2023 to 5,277 million in 2024, reflecting a year-on-year growth of 26% [5]. - The net profit is expected to improve from a loss of 909 million in 2023 to a loss of 349 million in 2024, indicating a 62% year-on-year improvement [5]. - The gross margin is expected to remain stable around 47% from 2023 to 2026, with a gradual increase in net profit margin projected to turn positive by 2026 [5][9]. Cash Flow and Balance Sheet - Operating cash flow is expected to improve from -999 million in 2023 to -497 million in 2024, indicating a trend towards positive cash flow in the future [9]. - The total assets are projected to grow from 6,316 million in 2024 to 7,434 million in 2026, while total liabilities are expected to increase from 2,437 million to 3,240 million in the same period [10]. Valuation and Price Target - The report suggests a price-to-sales (PS) ratio of 6-7 times for 2024, leading to a fair value range of 74.21 to 86.58 HKD per share [7].

Financial Performance - Total revenue for the first half of 2024 reached RMB 1.87 billion, representing a year-on-year growth of 27.1%[2] - Gross profit amounted to RMB 790 million, with a gross margin of 42.3%, down from 48.0% in the same period last year[2][3] - Adjusted net loss for the period was RMB 169 million, a decrease of 4.0% compared to RMB 176 million in the previous year, resulting in an adjusted net loss margin of 9.0%[2][3] - Revenue for the six months ended June 30, 2024, was RMB 1,866,600,000, representing a 27.1% increase from RMB 1,468,104,000 in the same period of 2023[11] - Gross profit increased to RMB 789,946,000, up 12.1% from RMB 704,581,000 year-over-year[11] - Operating loss improved to RMB (189,120,000), a reduction of 25.3% from RMB (252,953,000) in the prior year[11] - Net loss for the period was RMB (168,532,000), significantly lower than RMB (477,678,000) in the same period last year, marking a 64.7% improvement[12] - The period loss narrowed by 64.7% year-on-year to RMB 168.5 million, reflecting improved operational efficiency[33] - The company reported a loss attributable to owners of the company of RMB (151,598) thousand for the six months ended June 30, 2024, compared to a loss of RMB (456,068) thousand in 2023[26] Revenue Breakdown - Revenue from the core business, the Fourth Paradigm AI platform, was RMB 1.25 billion, showing a significant year-on-year increase of 65.4%[3][5] - The Fourth Paradigm AI platform accounted for approximately 67.0% of the group's total revenue[5] - SHIFT intelligent solutions business revenue was RMB 453 million, accounting for approximately 24.3% of total group revenue, with a year-on-year decline of 22.1%[7] - AIGS service revenue reached RMB 163 million, representing about 8.7% of total group revenue, with a year-on-year increase of 25.0%[8] - Revenue from SHIFT intelligent solutions decreased by 22.1% year-on-year to RMB 452.9 million, attributed to the transition of user demand to the Prophet AI platform[37] - Revenue from the Shisuo AIGS service grew by 25.0% year-on-year to RMB 163.1 million, benefiting from successful commercialization of large model capabilities[38] Research and Development - Research and development expenses for the first half of 2024 were RMB 850 million, accounting for 45.5% of total revenue[3] - Research and development expenses rose to RMB 850,045,000, a 28.5% increase compared to RMB 661,832,000 in the previous year[11] - The company has developed over 30 AI products across various industries, enhancing its product ecosystem[4][5] - The company has developed over 30 AI products based on the "Xianzhi AI platform," covering more than 20 industries by August 1, 2024[9] - The company aims to enhance AI application efficiency and core competitiveness across various industries through continuous technological innovation[6] - The company plans to invest in research and development to drive innovation and maintain competitive advantage[84] Customer and Market Engagement - The company served a total of 185 customers during the reporting period, with key customers contributing an average revenue of RMB 11.48 million, up 26.9% year-on-year[4] - The company has expanded its coverage to 14 industries, including transportation, energy, finance, and smart manufacturing[5] - The AI products are designed to support digital transformation across different sectors, enhancing service quality and operational efficiency[7] - The company reported a strong user growth rate, indicating increased adoption of its AI solutions[83] Financial Position and Cash Management - Total assets decreased to RMB 6,619,933,000 from RMB 7,147,274,000, reflecting a 7.4% decline[13] - Cash and cash equivalents were RMB 1,181,736,000, down from RMB 1,977,891,000, indicating a 40.2% decrease[13] - The company's current cash resources amounted to approximately RMB 2,778.0 million as of June 30, 2024, compared to RMB 3,295.3 million at the end of 2023[55] - The current ratio as of June 30, 2024, was approximately 3.5, an increase from 3.4 as of December 31, 2023, indicating strong financial risk resilience[57] - The company's debt-to-equity ratio was approximately 0.7% as of June 30, 2024, a significant decrease from 2.0% at the end of 2023, reflecting a stable capital structure[57] - The company manages its cash and cash equivalents and other financial assets by only transacting with state-owned banks and reputable financial institutions, minimizing credit risk[61] Corporate Governance and Compliance - The company has adopted corporate governance standards to protect shareholder interests and enhance transparency and accountability[70] - The board believes that the current arrangement of having the same individual serve as both Chairman and CEO will not compromise the balance of power and authority[70] - The company will continue to review and monitor its corporate governance practices to ensure compliance with established standards[71] - The company is committed to ensuring compliance with Hong Kong listing rules and regulations[81] Strategic Initiatives and Future Outlook - The company aims to enhance its artificial intelligence capabilities through the development of AI-generated software and AIoT solutions[83] - The company is focused on expanding its market presence and enhancing its product offerings in the enterprise-grade AI sector[84] - The average compound growth rate for the company's key segments is projected to be significant, reflecting strong market demand[83] - The company anticipates robust financial performance in the upcoming quarters, supported by its strategic initiatives[84] Employee Engagement and Development - As of June 30, 2024, the company employed a total of 958 employees, focusing on attracting and retaining talent through competitive salaries and benefits[66] - The company is committed to providing ongoing education and training programs to enhance employee skills and knowledge[67] Shareholder and Market Activities - The company did not declare or pay any dividends for the six months ended June 30, 2024[32] - The company repurchased a total of 259,800 shares during the reporting period, with a total cost of HKD 13,707,920[75] - The highest price per share during the repurchase was HKD 54.30, while the lowest was HKD 51.20[76]

Investment Overview - The company invested RMB 390 million in the Gao Teng Overseas Equity No. 3 Private Securities Investment Fund, representing approximately 5.3% of the total assets as of December 31, 2023[3] - As of December 31, 2023, the book value of the investment was approximately RMB 377.4 million[3] - The company holds 390 million shares of the fund, with an expected positive return upon the fund's maturity[6] Fund Focus - The fund primarily invests in an independent investment portfolio focused on debt and currency market products in the Asia-Pacific region[5] - The investment strategy is aimed at obtaining anticipated investment returns from the fund's projects[6]

[Table_MainInfo] 公司研究/信息服务 证券研究报告 第四范式（6682.HK）公司报告 2024年06月18日 [Table_InvestInfo] 首次 业绩表现优秀，十余年深耕行业大模 Q1 投资评级 优于大市 覆盖 型助力公司未来长期发展 股票数据 0[6Ta月b1le7_日S收to盘ck价（In港fo元] ） 52.75 [投Ta资ble要_S点um：mary] 52周股价波动（港元） 37.00-115.00 总股本/流通股（百万股） 466/135 总市值/流通市值（百万港元） 24574/7144  Q1业绩表现优秀，高度重视研发构筑技术护城河。5月28日，第四范式发 布2024Q1的核心业务进展，公司坚持科技创新，业务稳步拓展，用人工智 能+为千行万业贡献价值。2024Q1，公司总收入人民币8.3亿元，同比增长 市场表现 28.5%，毛利润人民币3.4亿元，同比增长21.1%。公司用创新驱动发展， 研发投入人民币3.5亿元，研发费用率42.0%，确保公司竞争力持续提升。 2024年3月，公司发布了定位为行业大模型平台的“先知AI平台5.0”，这 是该产品10年来第五次升级，该 ...

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Investment Rating - The report assigns an "Outperform" rating to the company [4][8]. Core Viewpoints - The company is a pioneer and leader in the enterprise-level AI sector, providing platform-centric AI solutions that address efficiency, cost, and value issues faced by enterprises during their digital transformation [4][8]. - The company's "Sage AI Platform" has maintained a leading market position in China for five consecutive years, according to IDC, and supports extensive model training and real-time inference [4][6]. - The company achieved revenue of 4.204 billion yuan in 2023, a year-on-year increase of 36.4%, with a gross profit of 1.980 billion yuan and a gross margin of 47.1% [4][10]. - The company has a clear profitability goal, with an adjusted net loss of 415 million yuan in 2023, narrowing the loss by 88.88 million yuan compared to 2022 [4][10]. Summary by Sections Company Overview - Founded in September 2014, the company focuses on enterprise-level AI solutions and has developed a robust AI platform that supports over 10,000 models [4][6]. Financial Performance - In 2023, the company reported a revenue of 4.204 billion yuan, with a gross profit margin of 47.1% [4][10]. - The revenue from the Sage AI Platform reached 2.506 billion yuan, growing 68% year-on-year, while the SHIFT intelligent solutions and AIGS services generated revenues of 1.283 billion yuan and 416 million yuan, respectively [10][11]. Future Projections - The company anticipates continued growth, with projected revenues of 5.277 billion yuan in 2024, 6.326 billion yuan in 2025, and 7.381 billion yuan in 2026, reflecting year-on-year growth rates of 25.51%, 19.89%, and 16.68% respectively [11][12]. - The report estimates a reasonable valuation range for the company at 73.31 to 85.53 HKD based on a price-to-sales ratio of 6-7 times for 2024 [8][10].

Financial Performance - Total revenue for 2023 reached RMB 4.204 billion, a year-on-year increase of 36.4%[7] - Gross profit amounted to RMB 1.980 billion, with a gross margin of 47.1%, reflecting a 33.2% increase compared to 2022[10] - Adjusted net loss for the year was RMB 415.5 million, a reduction of RMB 88.9 million or 17.6% from the previous year[10] - The revenue of the 4Paradigm Sage AI platform reached RMB 2.506 billion in 2023, representing a year-on-year growth of 68.0%, with its share of total group revenue increasing from 48.4% to 59.6%[12] - The SHIFT intelligent solutions business generated revenue of RMB 1.283 billion in 2023, a year-on-year increase of 7.4%, accounting for 30.5% of the total group revenue[16] - In 2023, the revenue from the AIGS service was RMB 416 million, representing a year-on-year growth of 4.7%, accounting for 9.9% of the total revenue of the group[20] - The company reported a significant increase in revenue, achieving a total of 1.5 billion RMB, representing a 25% year-over-year growth[70] - The company provided a positive outlook for the next quarter, projecting a revenue increase of 15% to 1.725 billion RMB[72] - The company reported bank loans and other borrowings of approximately RMB 108.7 million as of December 31, 2023[89] User Growth and Engagement - The total number of users increased to 445, with benchmark users rising to 139, representing a growth of 33.7% year-on-year[10] - The average revenue per benchmark user was RMB 18.38 million, with a net revenue growth rate (NDER) of 115% for benchmark users[10] - User data indicates a growth in active users, reaching 10 million, which is a 40% increase compared to the previous year[71] Research and Development - Research and development expenses exceeded RMB 1.7 billion, accounting for over 40% of total revenue[10] - The company invested over RMB 1.7 billion in R&D in 2023, with an R&D expense ratio exceeding 40%[26] - The company has achieved significant breakthroughs in several cutting-edge technology areas, with 25 papers accepted by top AI academic conferences and journals in 2023[26] - The AIGS platform has improved developer efficiency by over 30% through features like automatic code generation and code review[22] - The company launched the AIGS (AI-Generated Software) strategy in April 2023, aimed at reconstructing enterprise software using generative AI[25] Business Segments and Strategy - The company has established three main business segments: 4ParadigmSage AI platform, 4ParadigmSHIFT intelligent solutions, and 4ParadigmAIGS services[11] - The company continues to expand its influence in industries such as finance, energy, telecommunications, and transportation, while actively exploring strategic sectors like manufacturing, healthcare, and retail[10] - The AIoT business has shown significant growth, expanding into various markets such as transportation, industrial automation, healthcare, agriculture, and smart homes[15] - The company launched dozens of solution products during the reporting period, including smart supply chain solutions for retail and chronic disease management solutions for healthcare[17] Corporate Governance and Management - The company’s management team includes experienced professionals with backgrounds in artificial intelligence and finance, enhancing its strategic planning and operational management capabilities[65][66][67] - The board of directors emphasized the importance of corporate governance and compliance, with a focus on enhancing audit processes[72] - The company has adopted corporate governance principles and has complied with all applicable code provisions, except for C.2.1[143] - The board of supervisors consists of three members, including two shareholder representatives and one employee representative, with a term of three years[140] - The company has established three committees: the audit committee, the compensation committee, and the nomination committee, each with defined responsibilities and sufficient resources[156] Financial Position and Assets - Total assets as of December 31, 2023, were RMB 7.147 billion, with total liabilities of RMB 1.695 billion[8] - As of December 31, 2023, the total cash and cash equivalents amounted to approximately RMB 2,675.0 million, an increase from RMB 2,011.9 million in 2022[51] - The net current assets increased from RMB 3,367.1 million in 2022 to 4,013.4 million in 2023[53] - The current ratio as of December 31, 2023, was approximately 3.4, up from 3.2 in 2022[54] - The debt-to-equity ratio as of December 31, 2023, was approximately 2.0%, compared to -4.6% in 2022[55] Shareholder and Equity Information - The company’s shares were listed on the Hong Kong Stock Exchange on September 28, 2023[88] - The company has a significant ownership structure, with the chairman holding approximately 32.13% of the total equity in the company[110] - The company has not disclosed any plans for significant investments or capital assets as of the report date[63] - The company does not recommend the distribution of a final dividend for the year ending December 31, 2023[85] Risk Management and Compliance - The company is facing significant risks related to evolving AI technology, which could negatively impact its business and reputation[96] - The company acknowledges the potential impact of complex and changing privacy and data protection regulations on its operations[97] - The company has implemented comprehensive risk management policies across its operations and established an internal audit department to oversee compliance[168] Employee and Workforce Management - The total employee cost for the group for the year ended December 31, 2023, was approximately RMB 661.5 million, which includes salaries, bonuses, pension costs, and other employee benefits[131] - As of December 31, 2023, the company had a total of 1,801 employees, a decrease from 1,917 employees as of December 31, 2022[131] - The company has implemented a competitive compensation policy to optimize its incentive system in line with business development needs[131] Environmental, Social, and Governance (ESG) - The company plans to publish an independent environmental, social, and governance report alongside its annual report[94] - The group made charitable donations totaling RMB 250,000 during the reporting period[136] - The company is focused on maintaining strong relationships with stakeholders, including employees, customers, and suppliers, to ensure sustainable development[93]