Sino-Syke's 1H23 forecast net profit of the parent company was 60 to 80 million yuan. In line with market expectations, SIMC issued a 1H23 performance forecast: net profit of the return mother was 60 to 80 million yuan, and net profit of the non-return mother was 35-55 million yuan, turning a loss into a profit over the previous year. In the second quarter alone, net profit from the mother was 96-20.96 million yuan, and net profit from non-return mother net profit - 627-13.73 million yuan, in line with market expectations.
Key points of interest
The boom in the industry is picking up, and the company's performance is expected to reach an inflection point. The boom in the network visualization industry is gradually picking up, and demand from downstream customers is clearly recovering. Combined with the release of new demands such as AI security supervision and data security, we believe that the company, as a leading manufacturer in the network visualization industry, is expected to be the first to benefit. Meanwhile, the company's overseas projects have returned to normal, and demand has gradually increased. The company made every effort to promote project signing and execution at home and abroad. Some projects were successfully accepted and revenue confirmed in the current phase, and the company's revenue increased year-on-year.
Gross margin increased, reversing losses from parent net profit year on year. The company continues to improve product performance and optimize the product structure. Software products (including embedded software) account for a relatively high proportion of the 1H23 product structure, so the company's gross margin increased year-on-year (2Q22 gross profit margin 61.7%, 1H22 gross profit margin 70.8%). At the same time, instant payback revenue for software products increased year-on-year
The implementation of AI security supervision policies has boosted demand in the network visualization industry. On July 13, 2023, seven ministries and commissions including the State Internet Information Office jointly issued the “Interim Measures on the Administration of Generative Artificial Intelligence Services”.
Domestic generative AI regulatory policies have been implemented as scheduled, regulating the development of generative AI in China from dimensions such as data, algorithms, and computing power. We believe that focusing on the sustainable and secure development of AI domestically will increase investment in data and model protection. As front-end traffic collection terminals, network visualization products can perform detailed inspection and filtering of data and traffic to ensure data security. At the same time, mapping to the large model side, network visualization devices combined with AI capabilities are also expected to show that devices with higher levels of intelligence provide security protection for large models. We continue to be optimistic about the boom in the AI security supervision and network visualization industry.
Profit forecasting and valuation
The 2023/2024 profit forecast remains basically unchanged. The current stock price corresponds to the 2023/2024 54.9/36.6 times P/E, maintains an outperforming industry rating and a target price of 49.0 yuan, and corresponds to 55.3/36.8 times P/E in 2023/2024, with 0.66% room to rise from the current stock price.
risks
Downstream customer demand falls short of expectations, overseas business expansion falls short of expectations, and new business expansion falls short of expectations.