Zheshang Securities: Gives iFLYTEK a buy rating

Liu Wenshu of Zheshang Securities Co., Ltd. recently conducted research on iFLYTEK and released the research report "iFLYTEK Review Report: Spark Model V2.0 Heavy Upgrade, Release Code and Multimodal Capability", this report gives a buy rating to iFLYTEK, and the current stock price is 58.48 yuan.

iFLYTEK (002230)

Investment points

On August 15, 2023, the company held the Spark Cognitive Big Model V2.0 press conference, and the big model continues to improve

On the basis of general capabilities, code capabilities and multimodal capabilities have been released, and a number of related products and services have been launched simultaneously. The company and Huawei Ascend launched the iFLYTEK Spark all-in-one machine, aiming to empower enterprises to train and privately deploy proprietary large models on fully domestic independent innovation platforms, and promote the digital and intelligent transformation and upgrading of key industries. The iteration of large models is expected to promote the continuous improvement of the company's AI+ industry application business ecosystem.

The general capabilities of Spark Model V2.0 continue to improve, and the AI developer ecosystem is booming

iFLYTEK Spark Model V2.0 has continuously improved its general capabilities, including 72% in text generation, 78% in language comprehension, 70% in knowledge quizzes, 60% in logical reasoning, and 72% in mathematics. Since the release of the iFLYTEK Spark model on May 6, more than 700,000 new developers have been added to the iFLYTEK open platform, and more than 7,800 Spark assistants have been created since June 9, and there are currently AI assistant applications in the fields of code, medicine, and law, and the developer ecosystem has accelerated and prospered. Code capability heavy release, intelligent programming assistant iFlyCode 1.0 has a significant landing effect in actual scenarios Spark large model V2.0 code capability has five functional modules of code generation, code completion, code error correction, code interpretation and unit test generation, of which the large model in the real scene of the Python language environment, code generation and completion capabilities have surpassed ChatGPT, and several other capabilities have also been significantly improved compared with V1.5. The company released the intelligent programming assistant iFlyCode 1.0, which has rich code functions, can be seamlessly integrated into the integrated development environment (IDE) and provides professional code knowledge services, the assistant achieves code adoption rate of 30+%, coding efficiency by 30+%, comprehensive efficiency by 15+%, and efficiency in typical scenarios by more than 50% in internal applications.

In the education scenario, iFLYTEK Xinghuo Education Digital Base has accumulated 100,000+ application data and program scripts from 5000+ campuses, which can realize natural language interactive application development, shorten the development cycle by 94%, reduce investment costs by 90%, and have achieved remarkable results in Shanghai, Hubei, Anhui and other pilots.

The multimodal capability greatly expands the scope of model capabilities, and iFLYTEK Smart 2.0 is expected to improve the efficiency of user creation

Spark Model V2.0 has achieved breakthroughs in the field of multi-modality, and the multimodal capabilities released this time have several major capabilities: image description, image understanding, image reasoning, image recognition, text and image generation, and virtual human synthesis; The simultaneous launch of iFLYTEK Smart Work 2.0 can realize five functions: video analysis, creative copywriting, AI dubbing, picture generation and AI anchor, and multi-modal capabilities have been opened to users.

AI big models promote the continuous upgrading of smart education hardware and services

With the release of Spark Model V2.0, the company's product ecology in the education field has also ushered in upgrades: (1) Spark Language Partner 2.0 has been newly upgraded, which can realize thematic dialogue (the number of topics has been increased from 73 to 393), virtual human dialogue, speaking mock test (support CET, IELTS, TOEFL) and situational communication functions; (2) Xinghuo Teacher Assistant supports the three major links of unit teaching planning, teaching activity design and courseware production, so as to increase the efficiency of unit teaching planning by 50+%, the richness of teaching activities by 20+, and the efficiency of courseware production by 50%+; (3) iFLYTEK AI learning machine adds two functions: AI programming space and AI creative drawing board.

The Xinghuo all-in-one machine was released, and the company joined hands with Huawei Ascend to build a nationwide computing power base

At present, the single-card performance can be benchmarked against the A100, and the domestic computing power base for ultra-large model training is being further built. The Xinghuo big model training platform can realize the full-process design of training and data closed-loop, the integrated design of large model training and promotion, support hybrid cloud architecture, and large-scale heterogeneous computing power compatibility. The Spark All-in-One machine was released, which can support enterprise users to develop and deploy exclusive large models. In the future, the company's large model is expected to realize business value realization in education, medical, industrial, office and other scenarios, contributing new growth poles to the company's development.

Earnings forecasts and valuations

We expect that the company's revenue in 2023-2025 will be 235.76/313.88/41.169 billion yuan, a year-on-year increase of 25.27%, 33.13% and 31.16%, and the net profit attributable to the parent will reach 20.18/29.09/4.001 billion yuan, respectively, a year-on-year increase of 259.57%, 44.17% and 37.53%, corresponding to EPS of 0.87/1.26/1.73 yuan. Maintain "Buy" rating.

Risk Warning

risks arising from increased competition in the market; the risk of order growth or landing that is not as expected; the risk of the implementation and commercialization of AIGC-related technologies not being as expected;

According to the research report data released by the Securities Star Data Center in the past three years, the research team of Guo Yali of Huatai Securities has conducted in-depth research on the stock, with an average forecast accuracy of 69.9% in the past three years, and its forecast net profit attributable in 2023 is 1.056 billion yuan, and the predicted PE according to the current price conversion is 128.25.

The breakdown of the latest earnings forecast is as follows:

A total of 33 institutions have rated the stock in the last 90 days, with 27 Buy ratings and 6 Overweight ratings; The average institutional target price over the past 90 days is 78.52.

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