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China's AI industry is rapidly emerging, aggressively chasing after American OpenAI.
[Generative AI] As exports of cutting-edge Semiconductors to China are being restricted, it has been reported that emerging companies in the country may be catching up to U.S. tech giants’ Artificial Intelligence (AI) models at a pace that exceeds industry Financial Estimates. The emerging company DeepSeek, backed by a major Chinese hedge fund, has released a preview of its latest large-scale language model. <6702> Fujitsu <7046> TDSE <4011> Headwaters <3993>
Triple Eyes Research Memo (9): Currently, efforts are being made to improve the financial structure and enhance internal reserves for business expansion, continuing the suspension of dividends.
■Shareholder returns and efforts towards SDGs 1. Shareholder return measures Triple Eyes <5026> recognizes that returning profits to shareholders is also an important management issue. However, currently, the company is in a growth phase, and strengthening its financial position to respond to changes in the business environment and enhancing internal reserves for business expansion is considered the greatest benefit return to shareholders. For this reason, dividends are not being implemented. In the future, while enhancing profitability and improving the business foundation, it will be addressed.
Triple Eyes Research Memo (8): Promoting business area expansion through active M&A. Aiming for further growth through synergy creation.
■ The outlook for Triple Eyes ＜5026＞. 3. Mid-to-long-term Global Strategy. The company promotes uniqueness through the following four AI implementation strategies as a growth strategy: (1) Development of AI products and custom AI development, (2) Implementation of AI in legacy industries and launch of new services using capital and business partnerships as well as M&A, (3) Promotion of the GPU Server business, (4) Discontinuous growth through M&A. Notably, in the last two years, fields like Zero Field and BEX have become prominent.
Triple Eyes Research Memo (7): The contribution of the newly acquired BEX to performance is the biggest driver of increased profits.
■ The outlook for Triple Eyes (5026) 1. Performance forecast for the fiscal year ending August 2025 The consolidated performance for the fiscal year ending August 2025 is expected to be revenue of 5,992 million yen (a 35.9% increase from the previous year), operating profit of 111 million yen (a 192.6% increase), ordinary profit of 98 million yen (a 109.6% increase), and net income attributable to parent company shareholders of 30 million yen (a 59.6% decrease). Detailed revenue and operating profit by business segment have not been disclosed, but new consolidation will start from July 2024.
Triple Eyes Research Memo (6): The fiscal year ending August 2024 is expected to secure an operating profit due to the expansion of revenue from AI solution business, etc.
■ Triple Eyes <5026> Performance Trends 1. Overview of the performance for the fiscal year ending August 2024 The consolidated performance for the fiscal year ending August 2024 is revenue of 4,410 million yen (an increase of 88.0% compared to the previous period), operating profit of 38 million yen (compared to an operating loss of 269 million yen in the previous period), ordinary profit of 47 million yen (compared to an ordinary loss of 290 million yen in the previous period), and net income attributable to Shareholders of the parent company is 76 million yen (compared to a net loss of 825 million yen in the previous period). The initial announcement projected revenue of 4,045 million yen and an operating loss of 96 million yen, which was later upwardly revised.
Triple Eyes Research Memo (3): Composed of AI solution business and GPU Server business (1)
■Overview of Triple Eyes <5026> 1. Segment Information The company consists of itself and four consolidated subsidiaries (Simple Plan Co., Ltd., Shoshi Ichimon Shogi Center Co., Ltd., Zero Field, BEX), making a total of five companies. The segments are divided into two: AI Solutions Business and GPU Server Business. The AI Solutions Business is further composed of AI Integration, Engineering, AI Products, QITABANKUAI. The GPU Server Business is Zero Field.
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