2Q23 income / return net profit is still under pressure to maintain an increase in holdings.

According to the company's mid-2023 report, 1H23 achieved a total operating income of 5.17 billion yuan,-17.2% year-on-year, and a year-on-year net profit of 318 million yuan, a year-on-year net profit of-35.4% (in line with our previous expectation of-30% income 39%), of which 2Q23 revenue was-18.5% year-on-year, and home net profit was-29.3% year-on-year. Taking into account the fluctuation of demand, we adjust the forecast EPS for 23-25 to 0.700.78 EPS 0.88 yuan (the previous value 0.87 0.98 1.08 yuan). As of 2023-8-21, the company's average PE in 2023 was 22x, the company's diversified business developed rapidly, and the car display business landed volume, but in the short term, it was still affected by the high base in the same period, and the revenue release was weakened, giving the company 2023 22xPE valuation. Adjust the target price to 15.4 yuan (the previous value is 21.75 yuan) and maintain the "overweight" rating.

1H23 intelligent terminal is under pressure, while car display is eye-catching.

1H23 smart terminal revenue is-27.7% year-on-year, and its performance is weak. We expect it to be mainly due to the weakening of set-top box business. On the one hand, customs data show that the export volume / volume of 1H23 digital TV set-top box industry is respectively-17.4% and 28.1% compared with the same period last year, and overseas demand has weakened. On the other hand, in the same period, 1Q22 costs gradually upward, the company in order to maintain product competitive advantage, more intelligent terminal products shipped, resulting in a higher revenue base. The broadband networking business benefits from the company's new three major communications operators to collect bid-winning projects, or to maintain growth. The revenue of professional display business is + 40.9% compared with the same period last year, mainly due to the pull of car display business. Its company has made a number of display assembly projects for star models, and 23 years of growth can still be expected. However, small and medium-sized businesses are still facing declining demand in the mobile phone market.

Gross profit margin is negatively affected by professional display business.

The company's 1H2023 gross profit margin is 16.67%, mainly affected by changes in professional display business, year-on-year-1.52pct. Among them, the professional shows gross profit margin year-on-year-7.75pct, while the smart terminal business gross profit margin year-on-year + 2.2pct.

The expense rate decreased compared with the same period last year.

1H2023, the company's overall period expense rate compared with the same period last year-1.05pct. Among them, the sales expense rate is year-on-year-0.43pct (mainly due to the reduction of after-sales service fees and sales commission incentives). Management expense rate compared with the same period last year-0.2pct. The R & D expenditure rate is year-on-year + 0.94pct (stable in scale, mainly affected by declining revenue). Financial expense rate year-on-year-1.36pct (mainly affected by exchange gains and losses).

The medium-and long-term growth potential is still sufficient.

The company continues to grasp the emerging areas of the market, investment in automotive display business has shown results, and has strategically invested in the field of virtual reality XR terminal business, and related products have also been introduced to the market, which may benefit from the growth opportunities of continuous landing of new technology scenarios in the future.

Risk tips: increased competition in the industry; adverse fluctuations in raw material costs; decline in export demand.