SDIC Securities released a research report stating that by maintaining the Shangtang-W (00020) “buy-A” rating, generative AI is gradually moving from technology to application and driving demand growth in commercial orders. The company is expected to gain a certain market share based on technical capabilities and customer reputation, thereby driving performance growth. The company is expected to achieve operating income of 4.521/5.71/7.077 billion in 2024 to 2026, respectively. Thanks to organizational restructuring, it is expected that operating efficiency will be released, with a target price of HK$2.12. The company issued an announcement on 12.4 to complete the strategic organizational restructuring and establish a new “1+X” structure.

The main views of SDIC Securities are as follows:

After completing the “1+X” organizational restructuring, resource concentration is expected to accelerate profits.

The company completed a new round of organizational restructuring. According to the announcement, “1” represents the Group's core business to create an industry-leading AI cloud to achieve seamless integration of large devices, basic models and AI applications; “X” represents an ecological enterprise matrix, including smart cars “Brilliant”, home robots “Yuan Radish”, smart medical care, smart retail, etc. Each ecological enterprise will be responsible for business development by an independent CEO, and will receive more flexible incentive mechanisms and financing channels, so that they can more quickly seize market opportunities in their respective fields. The bank believes that this restructuring is a landmark event for the company to explore ecological cards under the AI wave. It is expected that resources will be concentrated in the generative AI sector with stronger competitiveness and faster growth, which will have a positive effect on accelerating profits.

Big computing power+big model+rich customer service experience, laying down competitive barriers in core business.

The company has been deeply involved in the AI field for many years and has formed a deep accumulation: 1) By the end of August 2024, 0.054 million GPUs were launched, and the controllable computing power reached 2WP, achieving 90% acceleration efficiency, rich computing power resources and leading engineering capabilities; 2) It has faster response speed and stronger learning ability to iterate cutting-edge algorithm capabilities. The Nisshin 5.5 released in July can target GPT-4O; 3) It has empowered leading customers in various fields such as government, finance, healthcare, the Internet, and automobiles. Customer service experience. The above accumulation not only guarantees the company's leading technical capabilities, but is also expected to be commercialized faster. Thanks to strong competitiveness, 2024H1's core business generative AI achieved revenue of 1.051 billion, an increase of 255%.

Empowering the implementation of leading brand applications is expected to usher in growth opportunities.

In the process of implementing this rotational AI technology application, the company has enabled customers such as Jinshan Office, Haitong Securities, Xiaomi, and Reading Wen Group to iterate and upgrade their business, and has been widely recognized. Along with the improvement of AI capabilities and the reduction in inference costs, the bank expects AI applications to increase product penetration rate or increase the number of users, thereby increasing the number of model calls, thereby boosting the company's performance.