Pay attention to the expansion of application scenarios and maintain the "buy" rating

The company reported that 22H1 income was 93 million yuan, down 34.1% from the same period last year, and the net profit returned to the mother was-39 million yuan, compared with 27 million yuan in the same period last year, deducting the non-return net profit of-42 million yuan, 16 million yuan in the same period last year, net operating cash flow-122 million yuan, and-67 million yuan in the same period last year. 22Q2's single-quarter income was 25 million yuan, down 68.4% from the same period last year. The net profit returned to the mother was-24 million yuan, compared with 25 million yuan in the same period last year, deducting the non-return net profit of-26 million yuan, and 16 million yuan in the same period last year. The reasons for the decline in performance: the revenue of the pan-security business affected by the epidemic has declined; the company has increased investment in research and development, and the cost has increased. We believe that the company continues to strengthen research and development, based on the video core technology, the application scene is expected to continue to expand. It is estimated that the EPS of the company in 22-24 is 1.58 yuan (0.80). 22e income 493 million yuan, comparable to the company's 22-year average 9.8xPS (wind), given 22e 9.8xPS, the target price of 60.06 yuan (the previous value of 41.87 yuan), to maintain the "buy".

The business income of video solutions increased sharply compared with the same period last year, and the business income of video solutions of 22H1 Company was affected by the epidemic by 75 million yuan, up 42.2%, 4 million yuan from pan-security products, a decrease of 94.5%, and 15 million yuan from technical services, a decrease of 40.0%. 22H1 actively develops industry applications and business scenarios, and the business revenue of video solutions is growing rapidly. There are many reasons for the decline in revenue from pan-security business: 1) some projects were cancelled or suspended due to the impact of the epidemic; 2) 21H1 achieved higher revenue in rail transit business, and the landing and acceptance cycle of such projects was longer; 3) the company's newly launched 5G edge computing terminal products were affected by the epidemic, and the delivery of hardware equipment was blocked, which led to the lower-than-expected landing speed of the business. We believe that video solution business is expected to develop rapidly with rich application scenarios, and pan-security business revenue is expected to recover gradually as the epidemic alleviates.

Investment in R & D has been increased, and application scenarios have been gradually expanded.

22H1 company sales expense rate 13.9%, year-on-year increase of 3.6pct, management expense rate of 14.6%, year-on-year increase of 2.5pct, R & D expense rate of 57.2%, year-on-year increase of 27.6pct, increased investment efforts.

At the end of 22H1, there were 269 R & D personnel, an increase of 24.0% over the same period last year. In terms of core technology, the company is committed to creating a national production video coding and transcoding platform, and 22H1 focuses on the adaptation and optimization of domestic servers, domestic CPU, domestic operating system and domestic database; in terms of application scene expansion, the company actively develops vehicle-mounted intelligent entertainment cockpit products, creating applications such as intelligent cockpit multi-screen linkage and cockpit immersion atmosphere. The increase of R & D investment lays a good foundation for the gradual expansion of application scenarios.

With a good technical foundation, it is expected to benefit from the gradual remission of the epidemic.

The company increases its R & D investment, has a good technical foundation, and is expected to achieve restorative growth with the relief of the epidemic.

Considering the impact of the epidemic, the income forecast is lowered, the cost input is increased, and the expense rate forecast is raised. It is estimated that the income from 2022 to 2024 will be 841 million yuan (552 million yuan), and the net profit of return to the mother will be 0.84 million yuan (0.98 billion yuan) and 1.11 billion yuan (1.44 million yuan).

Risk hint: the risk of repeated epidemic situation; the commercialization of R & D results is not as expected.