Event: in the first half of 2023, the company achieved revenue of 3.299 billion yuan, an increase of 4.21% over the same period last year, and a net profit of 221 million yuan, an increase of 81.33% over the same period last year. Corresponding to 23Q2 single quarter, the company achieved revenue of 1.671 billion yuan, an increase of 3.26% over the same period last year, and a net profit of 77 million yuan, an increase of 72.74% over the same period last year.

Domestic demand gradually recovered, and the comprehensive gross profit margin increased compared with the same period last year. In the first half of 2023, revenue from domestic business was 1.479 billion yuan, up 5.20% from the same period last year, while revenue from overseas business was 1.82 billion yuan, up 3.43% from the same period last year.

The company's domestic and foreign business income showed a gradual recovery trend, in which the gross profit margin of overseas business increased 6.13pct compared with the same period last year, mainly due to the company's deep cultivation in the international market for many years, the advance layout of channels and brand advantages, and the added value of the company's products and solutions gradually reflected. As of August, the domestic market demand has gradually recovered, the order conversion rate has increased, the gross profit margin has continued to improve, and the performance contribution of the company's high-end brand Redio will be repaired and improved quarterly.

Issue equity incentive plan to demonstrate long-term development confidence. This incentive plan intends to grant 21.999982 million restricted shares to the incentive objectives. the grant price of Class A rights and interests for the first time is 4.04 yuan per share, and the grant price of Class B rights and interests is 6.06 yuan per share. The 24-year operating income assessment target value of Class A corresponding to 23max is 80,000,000 yuan, and the estimated amortization expenses for 23-25 years are 594.10121227plus 31.12 billion yuan respectively.

We believe that the landing of the equity incentive plan will improve the company's long-term incentive mechanism and promote the company's long-term and steady development.

High-end display penetration increased, XR virtual shooting, AIGC open room for growth. In the field of Mini/Micro LED, the company has become a leading enterprise in the industry with full process, full product form, wide application coverage and leading production capacity. Zhouming UMini series products P0.4, P0.6, P0.7, P0.9, P1.1, P1.2, P1.5, P1.8 have achieved mass production, the cost has a competitive advantage, UMini has formed mass sales. Combined with LED display technology, on the one hand, relying on deep cultivation in the field of XR virtual photography, the company has been able to provide customers with XR full-process solutions, on the other hand, based on the requirements of LED application scenarios, the company has taken the lead in laying out digital content production and IP creation, from existing hardware display products, software technology self-research, digital content accumulation, to card set "hardware + software + content" integrated solution to improve the added value of the company's products. Build a new engine for the company's business development.

Profit forecast and investment rating. We estimate that the operating income of the company in 2023-2025 will be 81.78cm 98.41cm RMB 11.851 billion respectively, and the net profit from 2023 to 2025 will be RMB 581pm 723max 922 million, respectively, and the corresponding value will be 0.53pm 0.66pm 0.84 yuan per share. Taking into account the valuation level of comparable companies, the 23-year PE valuation range of 18-20x, corresponding to the reasonable value range of 9.55-10.61 yuan, to maintain a "better than the market" rating.

Risk tips: upstream chip prices continue to rise; industry competition intensifies; the company's capacity guarantee is not as expected; domestic and overseas demand is less than expected.