Summary of the report

Event: the company announced that its operating income in the first half of 2023 was 690 million yuan, an increase of + 54.6% over the same period last year, and its net profit was 50 million yuan, an increase of 206.7% over the same period last year.

The growth rate of revenue exceeds market expectations, and the foundation and growth business are developing rapidly.

During the reporting period, the company will strengthen marketing and promote project implementation and acceptance. Q1 realized revenue of 295 million yuan (+ 6.37%), and Q2 realized revenue of 396 million yuan (+ 133.54%). According to the sales contract, basic software products + 40%, Xinchuang business + 54%, big data related about 47%, the foundation and growth business are growing rapidly in the same direction. TOG side: actively expand the strong GIS government application industry other than natural resources. To participate in the construction of the digital twin platform of the Ministry of Water Resources, the successful digital twin three Gorges simulation engine, the procurement of Wushan intelligent water GIS supporting software platform, the optimization and upgrading of Shandong Yellow River management and protection information platform, and the Shaanxi Intelligent Yellow River project GIS procurement. Won the bid in Beijing, Sichuan, Qinghai and other places, as well as meteorological disaster risk assessment, early warning system and other key projects along the Sichuan-Tibet Railway. Continue to develop spatial data governance tools and participate in big data projects in Shanghai, Hangzhou, Zhengzhou, Wuhan and other places. To B side: strive to expand the boundary of GIS application. Increase the expansion of energy, communications, aerospace, transportation and other fields, win the bid for national pipe network, China Petroleum & Chemical Corp, Huaneng, aerospace holding subsidiaries, China Railway Construction, Academy of Railway Sciences and other users of GIS-related projects. In addition, participate in the construction of Wuhan Tianhe, Lanzhou Zhongchuan, Shenzhen Airport and other smart airport projects, participate in Lianyungang Petrochemical Industrial Park, Baotou Molybdenum Industrial Park, Zhiyangpu (Phase I) and other smart park projects. We believe that, benefiting from the construction of Digital China and the gradual and comprehensive promotion of Xinchuang from the party and government to the industry, the company's GIS basic software + industry application business market has a broad growth space. In the first half of the year, both basic and growth business showed a trend of rapid growth, and there was a strong certainty that the revenue scale of the whole year would achieve restorative rapid growth.

Rapid recovery of profitability, positive layout of market sales.

Profit side: in 23 years, H1 achieved a net profit of + 206.73% compared with the same period last year, the gross profit margin of sales was + 4.97pcts, and the profitability was quickly repaired. The total of the four expenses during the period is + 14.56% compared with the same period last year, which is-40.03pcts over the same period; the comprehensive expense rate is 49.15%, year-on-year-17.18pcts, and the overall cost control is better. Last year, the company went against the trend to increase investment in research and development, management and sales expenses, laying a good foundation for seizing market development opportunities this year. This year, we will focus on increasing market and sales expansion efforts, and the input of the other three expenses remains relatively stable, with only sales expenses being + 34.01% compared with the same period last year. Overall strengthen brand publicity and marketing, launch a supporting incentive and assessment mechanism; comprehensively sort out and establish a sales system, gradually improve the layout of the sales network; and constantly open up the government information and enterprise digital market. increased full-time sales in parks and airports. Asset-liability side: accounts receivable at the end of the period + 5.72% year-on-year, much lower than the revenue growth rate in the same period. The Ministry of Natural Resources regularly clears up the arrears of corporate accounts, and the risk of arrears of company-related accounts receivable has been weakened. Cash flow side: with the rapid growth of revenue and net profit, the net operating cash flow of the company is + 27.23% compared with the same period last year, and the trend is obvious. We believe that the company set aside a large amount of goodwill and asset impairment provision last year, which has reduced the historical burden for its sustained and healthy development.

As the enterprise revenue scale resumes the trend of rapid growth, its overall business performance is worth looking forward to in the future.

New direction: to build the integration of remote sensing GIS and deepen the integration of GIS+AI technology.

Create remote sensing GIS integration: enter the field of remote sensing production, officially release remote sensing software products-cross-platform remote sensing image processing desktop software [SuperMap ImageX Pro (Beta)]. The whole flow processing and application of remote sensing data with the integration of remote sensing GIS are realized. The integration of remote sensing GIS breaks the "separation" of remote sensing and geographic information system in the past, and realizes the landing of remote sensing GIS full chain application, which will provide more powerful and efficient data support for many industries. For the improvement of the performance of the whole process of remote sensing images, it is 50% shorter than that of similar software, reaching the dual readiness of Tene1 products, and realizing the ability of remote sensing image data production today and application tomorrow. Deepening the integration of GIS+AI technology: the future GIS laboratory of Supermap Research Institute had an early insight into the application prospect of generative AI (AIGC) and large models, and explored the layout in time. At present, the related research covers almost all the hot directions of AIGC and large models: 1) for CV large model, the product SuperMapGIS2023 released in June this year has integrated SAM visual large model, which helps remote sensing of all elements, fine-grained segmentation, and cooperates with upstream target detection model, which makes up for the deficiency of SAM semantic deficiency. 2) aiming at the large NLP model, it is introduced into the vertical field of the industry, and the privatization deployment scheme is provided. 3) aiming at the multi-modal large model, starting with AI painting, the integrated application project of adaptation planning business is developed, such as comparative map and planning concept map before and after rural reconstruction.

4) SuperMapGIS2023 follows the frontier of AI, integrates pre-training models represented by Transformer technology, and provides a variety of pre-training models for remote sensing image interpretation. 5) other directions, such as AI rendering (NeRF), AI generation of 3D scenes, and other lightweight CV large model schemes, have also carried out close attention and active deployment evaluation. At present, there are two important development trends in the field of surveying and mapping geographic information, one is 3s technology (the direct integration of GIS, RS, GPS), and the other is the further deep integration of 3s technology with artificial intelligence, big data, Internet of things and so on. We believe that the company will actively explore the application direction of GIS+ new technology, achieve continuous breakthroughs in GIS technology integration innovation and intelligent upgrading, and may enjoy the technological dividend of GIS+ new technology innovation and development in the future.

Investment suggestion

We believe that the growth rate of the company's revenue in the first half of the year exceeded market expectations, and the foundation and growth business achieved rapid development in the same direction.

Benefiting from the construction of Digital China and the gradual and comprehensive promotion of Xinchuang from the party and government to the industry, the company's GIS basic software + industry application business market has a broad growth space. It is estimated that the company's operating income from 2023 to 2025 is 1.914 billion yuan 2.333 billion yuan and 2.89 billion yuan respectively, and the net profit returned to the mother is 265 million yuan, 352 million yuan and 445 million yuan respectively, corresponding to the current PE of 41X/31X/25X, maintaining the "buy" rating.

Risk hint

Downstream demand is lower than expected; technology iteration is accelerated; market competition is intensified.