Group 1 - The integration of Deepseek AI model into local governance in Xiaoshan district marks a significant step in utilizing AI for grassroots governance [1] - AI technology is seen as a new productive force, presenting both opportunities and challenges for grassroots work, necessitating a balanced approach from local officials [1][2] - Successful applications of AI in various cities demonstrate its potential to enhance decision-making and operational efficiency, such as the "AI Grid Steward" in Hangzhou and the implementation of 70 digital employees in Shenzhen [1] Group 2 - The role of AI in grassroots governance is to complement human understanding, as AI can quickly access policies but lacks the ability to grasp the emotional nuances of citizens [2] - Grassroots officials are encouraged to be adept at using AI while maintaining a strong connection with the community, ensuring that technology serves to enhance human interaction rather than replace it [2] - The goal is for local officials to leverage AI for efficient governance while also engaging with citizens to understand their needs and concerns, creating a balance between technology and human touch [2]

Investment Rating - The report maintains an "Outperform" rating for the company [1] Core Views - The company is currently in a transformation phase, facing overall pressure, but AI empowerment is expected to drive future growth [1] - The company's revenue for 2024 is reported at 9.153 billion yuan, a decrease of 6.6% year-on-year, with a net loss of 2.061 billion yuan, which is an increase in loss compared to the previous year [6] - The decline in revenue is attributed to delayed customer demand and the impact of transitioning to a subscription business model [6] - The company’s cloud service revenue for 2024 is 6.85 billion yuan, a decrease of 3.4% year-on-year, while subscription revenue has grown by 26% [6] - The company has launched an enterprise service model, YonGPT2.0, focusing on AI and agent technologies, which are seen as strategic priorities for future growth [6] - The long-term growth potential is supported by the successful advancement of cloud business and AI initiatives, despite short-term challenges [6] Financial Data and Profit Forecast - Total revenue projections for 2025-2027 are 10.505 billion, 12.187 billion, and 14.181 billion yuan respectively, with expected growth rates of 14.8%, 16.0%, and 16.4% [5] - The forecasted net profit for 2025 is 101 million yuan, with significant improvements expected in subsequent years, reaching 410 million yuan in 2026 and 838 million yuan in 2027 [5] - The company’s gross margin is projected to stabilize around 49.4% in 2025, improving to 51.6% by 2027 [5] - The return on equity (ROE) is expected to turn positive by 2025, reaching 1.2% and improving to 8.7% by 2027 [5]