Summary of Huayang International Conference Call Company Overview - **Company**: Huayang International - **Industry**: Architectural Design and Digital Culture Key Points Industry and Business Performance - The architectural design sector has stabilized after a downturn, with contracts increasing by nearly 30% year-on-year in 2025, marking a rare positive trend in recent years [3] - The company has restarted campus recruitment in 2025 due to employee capacity saturation, indicating a stable operational environment [2][3] Digital Culture and Short Drama Platform - Huayang International has established a full-stack micro-drama platform with a team of approximately 130-140 people, having produced around 50 short dramas, with 20-30 already launched [2][4] - Revenue for the first quarter reached over 30 million, contributing to a total revenue of approximately 80-90 million [2][5] - The copyright operation is still in its early stages, with expectations for gradual establishment as the number of copyrights increases [5] Technology and AI Focus - The technology segment is focusing on AI applications, particularly in architectural design, with an emphasis on intelligent agents [2][6] - Despite breakthroughs in BIM technology, commercialization has faced challenges due to low willingness to pay, leading to a strategic retreat to AI design [8] - AI is seen as a means to reduce costs and enhance efficiency, with the potential for market differentiation [8] International Business Expansion - The Hong Kong subsidiary has performed well and is considered the best among all subsidiaries [7] - The company is exploring the establishment of a separate office in the Middle East to better expand local business [7] Future Development Plans - The core goal is to maintain a healthy financial position, targeting a net profit and cash flow of 100-200 million annually [9] - The company aims to extend its cultural offerings, particularly in micro-dramas, and actively pursue AI applications [9] - Plans to focus on large-scale expansions that support core business operations, while also considering cross-industry asset acquisitions [9] Market Dynamics and Competition - The micro-drama market is rapidly evolving, becoming a significant cultural phenomenon in China, with intense competition from various players [10][11] - The shift in business models from paid to free viewing, combined with backend copyright operations and brand integration, is transforming the industry landscape [11] - Huayang International faces challenges as a new entrant but has advantages such as a strong team and partnerships with major platforms [11] Order Growth and Market Strategy - The first quarter saw a 30% year-on-year increase in orders, the first positive growth in several quarters, boosting confidence [12] - The company plans to stabilize its scale and focus on new business development, even if order growth does not continue [12] Regional Market Focus - The company has reduced its scale, with revenue and personnel decreasing by approximately 30-40% and 50%, respectively, due to a strategic focus on the Greater Bay Area [13][14] - Future plans prioritize the Greater Bay Area, leveraging its strong influence and government project opportunities [14]

Core Viewpoint - Huayang International's sales gross margin continues to improve in 2024, with a 15.4% revenue increase in Q1 2025, marking a return to profitability [1][4] Financial Performance - In 2024, revenue decreased by 22.6% to 1.17 billion yuan, with a net profit of 130 million yuan, down 22.3% [3] - The gross margin for 2024 was 35.1%, an increase of 2.88 percentage points, while the net profit margin was 10.7%, up 0.03 percentage points [3] - Q1 2025 revenue was 260 million yuan, a 15.4% increase, but net profit decreased by 20.2% to 2 million yuan [4] Operational Metrics - In 2024, the operating cash flow was 170 million yuan, down from 290 million yuan in the same period of 2023 [3] - The accounts receivable decreased by 11.4% to 390 million yuan in 2024 [3] - Q1 2025 operating cash flow was -130 million yuan, compared to -90 million yuan in Q1 2024 [4] Strategic Initiatives - The company is continuously upgrading and optimizing its BIM design platform, enhancing its capabilities across various engineering disciplines [5] - Huayang International is expanding its market presence in regions such as South China, Central China, East China, Southwest, and North China, while also pursuing international business along the Belt and Road Initiative [5] - The company is actively developing a digital cultural platform, focusing on micro-drama content, AI applications, and cultural exports [5] Dividend Policy - The annual profit distribution plan includes a dividend of 0.35 yuan per share, with a payout ratio of 54.76% for the current year [5]