Put the money earned in advance and try to expand the business driven by more investment. Is this the path that Iflytek Co.Ltd(002230) (hereinafter referred to as ” Iflytek Co.Ltd(002230) “, Iflytek Co.Ltd(002230) . SZ) must go through to achieve the revenue target of 100 billion?
Iflytek Co.Ltd(002230) recently released the annual report of 2021 and the first quarterly report of 2022. According to its annual report, Iflytek Co.Ltd(002230) 2021 achieved an operating revenue of 18.3 billion yuan, a year-on-year increase of 40.61%.
While the revenue reached a new high, the profit also achieved double-digit growth, and the net profit attributable to the shareholders of the listed company was 1.556 billion yuan, a year-on-year increase of 14.13%; The net profit after deducting non recurring profits and losses was 979 million yuan, a year-on-year increase of 27.54%. However, in 2020, the company’s net profit attributable to shareholders of listed companies increased by 66.48%, and the net profit attributable to shareholders of listed companies after deducting non recurring profits and losses increased by 57% Iflytek Co.Ltd(002230) net profit growth was lower than that in previous years.
Previously, Iflytek Co.Ltd(002230) told the reporter of China Business Daily that a major factor affecting the growth of net profit is the continuation of Iflytek Co.Ltd(002230) recruitment and the investment of more costs in the cultivation of competitiveness facing the future. According to the financial report, in order to arrange the business in advance and increase the operation and resident personnel, the scale of Iflytek Co.Ltd(002230) personnel will increase by 3301 in 2021.
net profit growth is not behind the growth of enemy revenue
On April 22, 2022, our reporter learned from the performance explanation meeting of Iflytek Co.Ltd(002230) 2021 that Liu Qingfeng, chairman of Iflytek Co.Ltd(002230) responded to investors’ questions about the company’s net profit growth rate in 2021 being lower than that of revenue, the growth rate of medical business failing to meet expectations, and the decline of cash flow.
As for the impact on the growth of net profit, Liu Qingfeng said that it is mainly because Iflytek Co.Ltd(002230) has invested a lot in the layout around the long-term development of the company. Iflytek Co.Ltd(002230) believes that AI has changed social production and lifestyle, and its in-depth application in all fields of social life has just begun. Therefore, it is necessary to continue to increase investment.
According to the financial report, Iflytek Co.Ltd(002230) ‘s R & D personnel increased from 6400 in 2020 to 8300 in 2021, with a year-on-year increase of 30%. R & D investment increased from 2.416 billion yuan in 2020 to 2.936 billion yuan in 2021, with an increase of 520 million yuan and a year-on-year increase of 21.5%.
In addition, the R & D strength reserved for “iFLYTEK Super Brain 2030 plan” also affected the profit performance to a certain extent. Liu Qingfeng said that the company believes that the in-depth application of artificial intelligence in various fields of social life has just begun, and it is necessary to continue to increase investment. IFLYTEK’s R & D investment has actually formed a series of products. ” Iflytek Co.Ltd(002230) ‘s R & D investment has actually formed a series of products, which will not generate revenue and profits in 2021, but have a very important impact on 2022 and the longer term in the future.” Liu Qingfeng said.
Iflytek Co.Ltd(002230) said that although the increase in personnel costs has affected the growth of current profits, it has also laid a more solid foundation for the improvement of the company’s profitability in the next stage, the enhancement of the position of industry leader and the guarantee of sustainable development.
“During the 14th Five Year Plan period, we put forward the base business, systematic innovation and two wheel drive to support our more stable and long-term development and form a unique core competitiveness. I think we have made a down-to-earth investment in 2021.” Liu Qingfeng also pointed out that the profit of Iflytek Co.Ltd(002230) 2021 will be 1.556 billion yuan, but the goal is not to make a profit of more than 1 billion yuan, but to have a bigger future in mind.
The growth rate of Liu Qingfeng’s non-profit investment has also slowed down by nearly RMB 16.8 billion in 2020.
“base business” has been rooted for one year. What are the results
Iflytek Co.Ltd(002230) put forward the “base business” at the end of 2020, focusing on education, consumers, smart cities, operators, medical and other racetracks. The base business is the Iflytek Co.Ltd(002230) foundation and the fundamental business of revenue.
Iflytek Co.Ltd(002230) previously said that 2021 was also a year for the “base business” to take root. The financial report shows that the “base business” of Iflytek Co.Ltd(002230) currently accounts for more than 50% of the company’s total revenue.
In terms of business segments, in 2021, Iflytek Co.Ltd(002230) smart education revenue reached 6.007 billion yuan, a year-on-year increase of 49.47%, accounting for 32.82% of the total revenue; The revenue of open platform and consumer business was 4.687 billion yuan, a year-on-year increase of 52.19%; The smart city information engineering business realized a revenue of 2.851 billion yuan, a year-on-year increase of 60.74%.
Among the major basic businesses mentioned in Iflytek Co.Ltd(002230) above, the businesses in the three base areas of education, consumption and cities have achieved rapid growth and have gradually become the pillar of revenue. However, the growth rate of smart medical, which is highly expected, is only 8%, and its revenue is only 337 million yuan, with a decline in gross profit compared with the previous year. In this regard, Liu Qingfeng explained that the main problem is the business logic. IFLYTEK’s smart medical business adopts the business strategy of “pilot first and then promotion”. From 2021, Iflytek Co.Ltd(002230) is more distributed all over the country. “2021 is equal to the distribution of points. After the distribution of points, it will start to conduct acceptance in the pilot places in cities or provinces, and then carry out comprehensive promotion. Once a single point becomes the whole city and the whole province, its gross profit margin will be increased immediately.”
In addition, due to the impact of the epidemic, the leaders of local health committees concentrated on anti epidemic, and the bidding of some projects was affected. In 2021, some large-scale projects were postponed due to the anti epidemic led by the health commission. “Many of our projects are given priority for other purposes. We will help prevent and control the epidemic first and talk about it after the emergency.” However, Liu Qingfeng believes that the revenue growth of Iflytek Co.Ltd(002230) medical business is expected to double this year, and the gross profit margin will increase accordingly. However, whether the smart medical business can usher in the harvest period this year remains to be tested by time.
It is worth noting that under the situation of “tight government funds” generally recognized by the market, a large part of Iflytek Co.Ltd(002230) individualized teaching solutions for g-end business still achieved 48% revenue growth.
Gf Securities Co.Ltd(000776) analyst Liu Xuefeng believes that the high prosperity of Iflytek Co.Ltd(002230) core track provides the company with the guarantee of high growth and highlights the scarcity in the environment of low financial expenditure. However, at the same time, the proportion of g-end businesses such as teaching students according to their aptitude and smart city has increased, which also challenges the company’s financial indicators such as gross profit margin and cash flow. With the increase of the company’s market share and production rate, this situation may continue to improve.
“No matter whether the economic cycle is good or not, some businesses should be able to and better cross the economic cycle, or be less affected by some factors of uncertainty.” In Liu Qingfeng’s view, the base area business is to form a business with sustainable profitability that has been going through the economic cycle for a long time. This year, the business proportion will reach 50%, and the growth rate of the base area business will exceed 60%. When Iflytek Co.Ltd(002230) achieves the revenue target of 100 billion yuan, nearly half of the business revenue should come from the base area business. Its continuous profitability enables the company to make more leisurely innovation of a greater company, These businesses need to make some layout in advance.
Up to now, increasing investment is still the layout made by Iflytek Co.Ltd(002230) on the base business. Liu Qingfeng introduced that in 2021 Iflytek Co.Ltd(002230) while laying out the business in the base area, the number of front-line marketing and service personnel increased from more than 2900 to more than 3800, with a growth rate of 33%. The related expenses increased from 540 million yuan to 730 million yuan.
Its net operating cash fell to 2.2 billion yuan in 2020, but its net operating cash fell sharply to 2.3 billion yuan in 2020.
For the decline of cash flow, Liu Qingfeng explained that the main reason is that in order to further improve the common risk-taking ability with banks and suppliers, the company has implemented the “1 + 6” bank commitment payment mode. There will be 1.2 billion yuan of bills cashed in 2021, which has a great impact on cash flow, but the impact will be basically eliminated in the future years.
It is worth noting that the chip tension in the whole industry also affects the company’s payment method, and then affects the cash flow. Under the background of lack of core, the buyer’s market becomes the seller’s market. Liu Qingfeng said, Iflytek Co.Ltd(002230) in order to continuously implement the policy of guaranteed supply and preparation, chip procurement is basically through prepayment and cash delivery. This also makes the purchase price paid by Iflytek Co.Ltd(002230) because of the guaranteed supply and preparation of chips about 1.018 billion yuan in 2021, an increase of 500 million yuan over 2020. “Being able to prepare chips is a victory, especially in the case of freight problems recently, it is very important to prepare the arrival of goods, which also provides a good guarantee for our performance development this year.” Liu Qingfeng said.
