Key points of investment

Incident: The company disclosed the 2023 semi-annual report. 23H1 achieved net income of 6.45 million yuan, 2023H1 achieved total operating income of 212 million yuan, a year-on-year decrease of 25.04%; realized net profit of 7.94 million yuan, a year-on-year decrease of 71.66%; realized net profit of 6.45 million yuan, a year-on-year decrease of 71.08%.

By business, 1) The developer service business 23H1 achieved revenue of 26.74 million yuan, an increase of 4.02% over the previous year. The company accelerated iteration of existing products and innovated service models. The growth mainly came from the company's further expansion of IoT businesses such as smart home appliances and smart cars;

2) Commercial service business 23H1 achieved revenue of 57.21 million yuan, a year-on-year decrease of 58.17%, mainly due to increased service and brand service business revenue reduction. Among them, service revenue increased by 19.03 million yuan, a year-on-year decrease of 79.53%, mainly due to delays in recovery and cost reductions and efficiency increases for some customers, which led to a decrease in both clicks and unit price; energy increase and risk control service revenue was 32.58 million yuan, up 1.58% year on year, mainly due to the company's accumulation of innovative technologies such as vectorization and big data joint computing, service capacity continued to increase; brand service revenue was 5.37 million yuan, a year-on-year decrease of 21.93%, mainly because the brand owner's advertising budget had not yet been recovered; 3) Public service business achieved revenue of 23H1 million yuan. With a year-on-year increase of 6.14%, the company's SaaS products remain sticky. At the same time, it is actively exploring new business scenarios such as collaborative data management and accurate publicity and defense, and has maintained steady revenue growth.

The overall gross margin increased due to changes in the business structure. The cost ratio increased year-on-year. The company's gross margin in 2023H1 was 70.42%, up 3.4 pct from 67.05% in the same period last year. Mainly, gross margin increased overall due to lower gross margin growth and a decline in the share of revenue from the service business (about 30%). The gross margin of 23H1 developer services, commercial services, and public service businesses was 63.90%/66.35% %/ 74.46%, respectively, year-on-year -9.22pct/+12.78pct/-7.24pct. On the cost side, all of the company's expenses have been reduced, but the decline in revenue has led to a year-on-year increase in the cost ratio. The sales/management/R&D/financial expense ratio was 17.83%/22.01%/33.82%/-6.43%, respectively, with a year-on-year increase of 2.34 pct/4.3 pct/7.74 pct/8.91 pct.

The closed loop of DMP business continues to be strengthened, and public services are growing steadily

1) Data accumulation layer Data: The cumulative number of service SDKs installed by the company's developers has exceeded 100 billion, reaching a new high. Among them, the cumulative number of SDKs installed for smart IoT devices has exceeded 300 million, and the number of daily active users of the user operation platform has exceeded 90 million. 2) Data governance layer Machine: As of 23H1, the company has processed and added more than 50 TB of data in real time every day, formed more than 5,000 types of data tags, and reserved high-quality computational resources for large-scale model applications. 3) Data application layer People: The company combines data models with industry expert knowledge to create an intelligent data application platform.

Under pressure from the government budget, the company's public service revenue continued to grow steadily. In particular, Q2 achieved a strong recovery. New and old SaaS products have formed a combination to jointly expand the market, covering more than 2,800 districts and counties across the country. At the same time, based on the industry knowledge and channel advantages accumulated by SaaS products, the DiOS project business has been rapidly expanded in many provinces. Furthermore, the company is exploring new scenarios such as data intelligence applied to data collaborative management and policy promotion to further save momentum for future development.

A “pioneer” in data element reform, empowers customers to innovate in digital intelligence, adhere to the “self-quantity-control - quantify” development strategy and continue to deepen the data element market. The company promotes a joint computing model for big data, expands service forms according to customer needs, and escorts the safe and efficient flow of data value.

At the same time, we are actively promoting the construction of the Zhejiang Big Data Joint Computing Center, which is an important infrastructure for the digital port in China (Wenzhou), and fully implementing the new model of “no data flow but data value flow”. Currently, it has implemented various industry scenarios such as marketing and finance, and has received good feedback from within the industry. In the context of entering the era of big models, the company is actively implementing comprehensive technological changes. By using data weaving technology, the company successfully realized the close integration of the industry knowledge base and the daily interactive big data tag feature library, laying a solid foundation for the application of the big model.

This large model, which combines the company's strong data capabilities, not only empowers natural language conversational interaction during the industrialization process, but also satisfies the needs of various vertical fields, such as brand marketing, internet operation, urban governance, and smart transportation.

Profit forecasting and valuation

We expect the company's revenue for 2023-2025 to be 550/7.06/872 million yuan, up 4.62%/28.40%/23.41%; net profit attributable to shareholders of the parent company was 0.39/0.57/0.66 billion yuan, respectively, up 50.24%/45.26%/14.36%; EPS was 0.10/0.14/0.16 yuan, respectively, at the closing price of August 24, 2023, corresponding PE 173.24/119.26/ 104.28 times From the business level, we are optimistic that the market penetration rate of the company's new SaaS products for public services continues to rise, commercial services are accompanied by macroeconomic warming, and performance growth brought about by the expansion of data intelligence operating system business categories and customers; from the company's strategic level, the company is expected to continue to play an important role in the data element market in the future and maintain the “increase in maintenance” rating.

Risk warning

Risk of macroeconomic fluctuations, risk of increased market competition, risk of policy supervision, risk of data resource security, risk of product delivery falling short of expectations, risk of high customer concentration.