Income is growing rapidly, profitability is improving, and losses are further narrowing. In the first half of the year, the revenue of Innovation Qizhi reached 650 million yuan, an increase of 76.1% over the same period last year, mainly due to: 1) the revenue of the manufacturing / financial industry increased by 83.8%, 78.3% to 340 million / 220 million, accounting for 52% of the revenue, accounting for 52%, 34%, and 2) the acquisition of two new subsidiaries broadened the scope of business, thus contributing to revenue. Gross profit was 210 million yuan, an increase of 81.8% over the same period last year; gross profit margin was 31.9%, an increase in 1pct over the same period last year, mainly due to economies of scale, increased pricing power, improved standardization of products and services, and more accumulated technical assets, among which gross profit margins in manufacturing and other industries increased by 3.0pct and 4.6pct respectively, offsetting the impact of a year-on-year decline in 3.8pct in the financial industry. The loss attributed to shareholders was 230 million yuan, down 17.0% from the same period last year; the adjusted net loss was 60 million yuan, down 3.0% from the same period last year; and the adjusted net loss rate was 9.2%, narrowing 7.5pct compared with the same period last year.
The epitaxial acquisition helps the company to improve the "AI+ manufacturing" territory, and the future revenue contribution capacity is worth looking forward to. On May 20, Creative Qizhi signed a share transfer agreement with an independent third party to acquire 51 per cent shares in Shanghai Haoya (renamed Haoya Intelligence) and Qingdao Olippo (renamed Olympus) at a cost of 153 million RMB and 122 million RMB respectively. Haoya Intelligence is an overall solution provider of industrial automation systems that has been deeply cultivated in the field of automotive equipment for many years, with a total income of 210 million yuan in 2021, an after-tax loss of 6.62 million yuan, a loss rate of 3.1%, and a commitment to achieve business income of 220 million yuan, 330 million yuan and 440 million yuan from 2022 to 2024. Olipuqizhi is a leading overall solution provider of manufacturing operations management (MOM) in China, with a total revenue of 74.02 million in 2021, an after-tax loss of 12.21 million yuan, a loss rate of 16.5%, and a commitment to achieve operating income of 80 million, 150 million and 225 million yuan from 2022 to 2024. This acquisition will help enhance the company's overall competitiveness in the field of AI+ manufacturing.
Technology research and development plus commercial landing keep pace with each other. In terms of research and development, in the first half of the year, the company applied for 63 new patents and applied for a total of 697 patents, of which invention patents accounted for 90%. R & D expenditure recorded 220 million, an increase of 82.8% over the same period last year, and the R & D expenditure rate was 33.7%, both year-on-year and month-on-month. Under the continuous R & D investment, the intelligent manufacturing system (AIMS) with MMOC technology platform as the core has more and more functions, carries more and more AI products and solutions, and has made rich achievements in automotive equipment, panel semiconductors, energy and electricity, iron and steel metallurgy and other fields. Successful commercial landing programs have driven rapid growth in various areas, with income growth of 61 per cent, 710 per cent, 1095 per cent and 2934 per cent respectively in the first half of the year, with revenues of 120 million, 51.07 million, 41.14 million and 31.07 million respectively. In August 2022, Innovation Qizhi was awarded the recognition of the national specialty special new small giant enterprise. By the end of the first half of the year, its four subsidiary companies have been recognized as provincial and municipal specialized and special new enterprises.
Investment suggestion: considering that the epitaxial acquisition has improved the growth of the company, we have slightly raised our revenue forecast. It is estimated that the company's revenue from 2022-2024 will reach RMB 1.55 billion, with an increase of 80.5%, 57.6% and 57.9% over the same period last year. The adjusted net profit is-1.5 won, 10.0 billion. We have slightly raised the target price of Innovation 2121.HK to HK $32, corresponding to 6x 2023e PCMS, maintaining the "buy" rating.
Risk tips: the risk of increased competition in the industry, the risk of customer loss and insufficient customer intake, the risk of performance growth and cost control falling short of expectations, and the risk of valuation adjustment in the industry as a whole.