Overview of events:

1) on July 15, Shengshi Technology issued the "2023 half-year performance Forecast". The company expects to make a profit of 1.19 to 131 million yuan in the first half of 2023, an increase of 50 percent over the same period last year, and 50 percent to 110 million yuan after deducting non-homing net profit, an increase of 50 percent over the same period last year.

2) on the same day, the company issued an announcement on the completion of the equipment procurement contract for the intelligent transformation and upgrading project of Ruili (including Kanachi) Port (Phase I) and the signing of the general contract for the design, procurement and construction of the Nanxi River Joint Inspection Building at Hekou Port. The contract amount of the project is 106 million yuan and 166 million yuan respectively.

According to the performance forecast, the company expects that the net profit of homing and deducting non-homing net profit in the first half of the year will increase by 50%, 65% compared with the same period last year. The reason for the rapid growth is the recovery of the macro environment, the continuous optimization of immigration policy, the comprehensive repair of the port industry environment where the company is located, and project acceptance and revenue recognition gradually returning to the normal pace.

In order to further ensure and facilitate the exchange of Chinese and foreign entry and exit personnel and promote the opening of services to the outside world, the State Administration of Immigration has issued a notice to further adjust and optimize policies and measures for entry and exit administration. In accordance with the requirements of policies and measures, the national border inspection authorities will fully resume border inspection and fast customs clearance from May 15, and entry and exit passengers who meet the requirements can choose shortcut channels for efficient and smooth customs clearance. Shengshi Technology, as the construction and operation and maintenance of the national express customs clearance system, makes every effort to provide rapid customs clearance upgrading and operation and maintenance support for hundreds of ports across the country, including Beijing, Shanghai, Guangzhou, Dongxing, Friendship, Hekou, Ruili, Mohan and so on.

Yunnan won the bid of more than 100 million yuan, which shows the competitiveness of the smart port field. The company has been ploughing the smart port for more than 20 years and has rich successful experience in the overall solution of the intelligent port inspection system. According to the announcement, the company has successively won the bid for the information upgrading project of Nanxihe Joint Inspection Building at Hekou Port and the wisdom transformation and upgrading project of Ruili (including Kancho) Port (Phase I), with a contract amount of 166 million yuan and 106 million yuan respectively, demonstrating the company's comprehensive strength and brand competitiveness in the field of intelligent ports.

According to the information released by the Information Office of the Yunnan Provincial people's Government in February, we will formulate and implement a three-year action plan for port construction, speed up the construction of hub ports and intelligent ports, and strive to create three key port cities, namely, Hekou, Mohan and Ruili, and issue and implement a number of policies and measures to support the construction of the three ports. In June, according to the Yunnan Provincial Department of Finance, it focused on supporting the construction of Mohan international port and border port cities, and made it clear that Yunnan will allocate 1.8 billion yuan a year to support the construction of Mohan international port from this year to 2025. We believe that the company is expected to benefit from the rapid growth of the port economy and related system solutions in Yunnan Province.

Seize the opportunity of "Belt and Road Initiative" to open up the space of overseas market

The company closely follows the national "Belt and Road Initiative" strategic layout of overseas markets. According to the announcement, in April this year, the company used its own funds to set up wholly-owned subsidiaries in Saudi Arabia and Cambodia through its wholly-owned subsidiary Hong Kong Shengshi, and through the establishment of local wholly-owned subsidiaries, it was able to better approach market demand and lay the foundation for promoting the landing of local demand and project delivery. According to the company's official account, on May 18, at the first China-Central Asia Summit, Shengshi signed a tripartite cooperation agreement with the State Investment Agency under the President of Kyrgyzstan and Kyrgyzstan Post Co., Ltd. to jointly promote the cooperation and development of Kyrgyz Post Co., Ltd. Investment projects, postal outlets and international and domestic logistics digitization.

The company regards the development of overseas markets as an important layout, focuses on tracking the needs of the "Belt and Road Initiative" national digital society construction project, continues to increase investment in personnel and funds in overseas markets, and strives for more projects, especially the landing of large-scale benchmarking projects, strengthen in-depth cooperation with partners and promote overseas markets to become a new profit growth point for the company.

Investment suggestion

As the forerunner and leader of domestic intelligent port, Shengshi Technology has many years of port information construction experience, overall solution advantages and perfect ecological layout of AI+ products. We believe that under the catalysis of the recovery of entry and exit demand after the epidemic and the accelerated construction of Hainan customs control points, the company will usher in rapid growth. It is estimated that the operating income of the company from 2023 to 2025 is 1.982, 2685 and 3.693 billion yuan respectively, and the net profit returned to its mother is 2.88, 490 and 556 million respectively.

Maintain the Buy-An investment rating with a six-month target price of 53.18 yuan, equivalent to 28 times dynamic price-to-earnings ratio in 2024.

Risk Tips:

Product and technology R & D risk; overseas business development is not as expected; immigration policy relaxation is not as expected; impairment risk is calculated for receivables.