In the first half of the year, the overall performance was stable, and the restructuring of Mathematical Intelligence operations encountered temporary labor pains and is expected to recover in the second half of the year. In the first half of 2023, the company achieved revenue of about 3.282 billion yuan, an increase of 5.6% over the same period last year. Among them: the revenue of the three new businesses reached about 1.091 billion yuan, an increase of 8.7% over the same period last year, accounting for about 33.3% of the revenue. Traditional and BSS businesses continued to maintain stable development, and revenue increased by 4% over the same period last year. In addition, the company's newly signed orders increased by 20%, of which new orders for three new businesses increased by 70%.
Among the three new businesses, the digital intelligence operation product line has declined by 6% compared with the same period last year, mainly due to two factors: one is that the original traditional iResearch consulting business is affected by the industry environment such as consumer / Internet; the other is the impact of internal restructuring work from last year to this year on the company's original DSaaS platform business. After the acquisition of iResearch Consulting, the company set up a wholly-owned subsidiary, iResearch Digital Intelligence, and all business boundaries have been adjusted with the company's overall business structure, and the previous joint billing methods of various business departments (such as Telecom BU) have changed, resulting in short-term labor pains in DSaaS revenue. The company's management disclosed that the integration of the digital intelligence operation product line has come to an end, will begin to work in the second half of the year, and is expected to maintain double-digit revenue growth for the whole year, with the goal of achieving more than 2 billion of revenue scale unchanged by 2025. In terms of vertical product lines, the company continues to maintain rapid growth, especially in the three pillar industries of energy, transportation and government. Through the collection ability of standardized product portfolio and solutions, the company continues to maintain high prosperity in major projects such as 5G private network, IoT, traffic data hub and so on. According to the data disclosed by the company, so far, the penetration rate of the company's 5G network in the energy field has reached 30%, while that in other energy areas (wind, light, coal power) is only 1%, which has great potential for development. In terms of OSS product line, the company continues to maintain a leading position in the industry, with low revenue in the telecommunications sector in the first half of the year, but still achieved 15 per cent year-on-year growth. The company plans to achieve a revenue scale of 50% of the three new businesses by 2025, with the goal unchanged.
Build a cognitive enhancement platform for TAC MaaS communication. In 2023, the company released the telcoGPT white paper and built a communication awareness enhancement platform for TAC MaaS. The platform is a communication industry model platform built on the general LLM model, based on various application scenarios in the telecommunications industry, enabling the AI capabilities of GPT, such as BI, intelligent customer service, code generation, telecom marketing, scene billing and so on. The GPT application in To B field must be based on the sub-model of industry data and characteristics. The company has accumulated more than 20 years in the telecommunications field, and the accumulated industry knowledge, data and business platform will effectively help the landing of GPT applications in the telecom industry.
Valuation suggestion: we forecast that the company's operating income from 2023 to 2025 will be 87.01 (- 2%) / 98.33 (- 2.2%) / 109.67 (- 2.6%) respectively. The net profit was RMB9.91 (- 2.4%) / 11.29 (- 3) / 13.17 (- 4) billion respectively, and the CAGR of net profit in the period 2022-2025 was 16.9%. We use the method of separate valuation and summation of each business line, in which BSS business uses PE valuation method and other business lines use PS valuation method. Considering the slow growth of BSS revenue, as a traditional telecom business, we give 5 times PE (PEG 0.3, China Telecom Corporation Hong Kong stock PEG 0.66); DSaaS business, 3 times PS (formerly 4 times); vertical industry and enterprise cloud (MSP) business, 4 times PS in 2023 (same as before); and OSS business, 5 times PS in 2023 (same as original).
If the four business lines are added together, the target market value is 18.264 billion yuan (- 12.2%), and the target price is 19.53 yuan per share, corresponding to 21.20 Hong Kong dollars per share (- 16.2%). (the exchange rate of RMB and Hong Kong dollar is 0.9213), maintaining the "better than the market" rating.
Based on the fact that the overall PE after the valuation of the sub-business line is 18 times, which is lower than the average PE multiple of horizontally comparable ICT (Table 2), we believe that the company is within a reasonable valuation range.
Risk hint: the shrinking of the company's BSS business affects profitability, the growth rate of three new businesses is lower than expected, the macro market risk increases, affecting the overall valuation level of the company's related business areas and other negative factors.