Main points of investment

Event: 23H1, the company achieved revenue of 5.17 billion yuan, down 17.15% from the same period last year; net profit of 318 million yuan, down 35.36% from the same period last year; and net profit of 323 million yuan, down 27.25% from the same period last year. In a single quarter, 23Q2, the company achieved revenue of 2.83 billion yuan, down 18.5% from the same period last year.

Weak demand suppresses the pace of order delivery, and orders are expected to be released gradually in the second half of the year. 23H1, the company's revenue declined compared with the same period last year, of which the revenue of the smart terminal business reached 3.77 billion, down 27.67% from the same period last year, mainly due to the weak global consumer demand for set-top boxes, the slow delivery pace of the company's winning orders, and the decline in unit price. In the first half of the year, the company's main business continued to win the bid: the company won the bidding for mobile intelligent set-top box collection with a total share of 28.39%; the winning telecom group broadband convergence terminal collection project bid package; Unicom home intelligent gateway collection project, and so on. And the service coverage and market share of overseas intelligent terminals are gradually increasing. We expect the order to be delivered gradually in the second half of the year, contributing to the performance.

The growth of automobile display is expected, and the small and medium-sized mobile phone display modules are actively transformed. 23H1, the company's professional display business achieved revenue of 1.256 billion yuan, an increase of 40.93% over the same period last year, mainly due to the outstanding performance of the automobile display business. 23H1, the company's automobile display business has continuously obtained a number of star model display projects, and the products are highly competitive and will be delivered in accordance with the business plan in the second half of the year. In terms of mobile phone modules, affected by the weak mobile phone market and fierce competition, the business lost money and dragged down net profit. The company is actively taking measures to improve the marketing order acceptance capacity by shifting to directly docking brands and expanding into other display business areas such as POS / robots / drones, and is expected to gradually narrow losses in the second half of the year.

The cost side is relatively stable, and the gross profit margin is slightly lower than the same period last year. 23H1, the company's gross profit margin reached 16.7%, a year-on-year reduction of 1.52pct, in which professional display business gross profit margin was-0.9%; sales / management / R & D expense rates were 4.7%, 1.6%, 5.7%, respectively, year-on-year change-0.4/-0.2/0.9pct. The decline in sales expense rate is due to the reduction of after-sales service fees and sales commission, and the decrease of management expense rate is due to the reduction of employees' salary.

Actively embracing AI technology, the internal testing and production application development of some products have been completed. The company actively follows up the development and application of artificial intelligence big language model technology at home and abroad: in April, the company signed an Azure enterprise EA service agreement with Microsoft Corp, including GPT 3.5,4.0 application services, etc.; it has completed the internal testing of some products and product application development.

Profit forecast and investment rating: affected by the weak global consumer demand in the first half of the year, we reduced the company's homed net profit for 2023-2025 from 9.6 to 1.02 billion yuan to 8.5pm, an increase of 3%, 27% and 22% over the same period last year. We are optimistic about the technology and channel barriers that the company has as an intelligent terminal leader, and the follow-up with overseas product iteration and AI empowerment is expected to usher in an increase. Maintain a "buy" rating.

Risk Tip: lower than expected risk of order delivery, lower than expected risk of AIGC technology and applications