Revenue and profit growth accelerated in the second quarter, maintaining a “buy” rating
The company's revenue and profit increased rapidly in the second quarter, and operating cash flow improved. The country attaches great importance to autonomy and control, and the importance of domestically produced firmware is highlighted. The company's products have been adapted to mainstream domestic chips, have a leading market share, and are expected to usher in good development opportunities. If we do not consider the performance and impact of the acquisition target, we keep our profit forecast unchanged. We expect net profit from 2023-2025 to be 102, 1.51, and 221 million yuan, EPS is 1.18, 1.74, and 2.54 yuan, and the corresponding PE at the current stock price is 47.6, 32.2, and 22.1 times, maintaining the “buy” rating.
Event: Company Releases 2023 Semi-Annual Report
In the first half of the year, the company achieved revenue of 135 million yuan, an increase of 27.47% over the previous year, net profit of 50.72 million yuan, an increase of 245.33% over the previous year, after deducting non-return net profit of 4.61 million yuan, an increase of 15.51% over the previous year. In the second quarter alone, the company achieved revenue of 70 million yuan, a year-on-year increase of 30.25%, a year-on-year increase of 43.95 million yuan, a year-on-year increase of 3277%, after deducting non-return net profit of 2.25 million yuan, a year-on-year increase of 129.74%. The performance exceeded our expectations.
Revenue and profit growth accelerated in the second quarter, and operating cash flow improved markedly. The company's revenue and profit growth accelerated in the second quarter. The sharp increase in profit was mainly due to the company's transfer of 10.83% of the shares in subsidiary Zhuo Yi Culture in June (holding 46.77% of shares after the transfer), confirming investment income of 41,117,200 yuan from the share transfer.
The company's overall gross margin for the first half of the year was 47.13%, down 1.02 percentage points from the previous year. The sales, management, and R&D expenses ratios were 2.40%, 24.33%, and 17.23%, respectively, and -1.55, +11.66, and -8.22 percentage points from the previous year, respectively. The sharp increase in the management fee rate was mainly due to the company's confirmation of payment expenses for 14.08 million shares. After excluding share payment expenses, the company deducted 18.69 million yuan in non-profit, an increase of 367% over the previous year. The company's net cash flow from operating activities in the first half of the year was 22.49 million yuan, compared to 11.5 million yuan for the same period in 2022. Operating cash flow improved markedly.
Xinchuang and AI bring great opportunities for development. The acquisition of Aipuyang opens up incremental space. Countries attach great importance to autonomy and control. Recently, Xinchuang's tenders have continued to be implemented, and the proportion of localized server purchases has continued to rise. In the context of innovation, the importance of domestic firmware has been highlighted. The company's products have been adapted to mainstream domestic chip brands, have a leading market share, and are expected to usher in good development opportunities. Nvidia's performance has exceeded expectations to verify that AI computing power is booming. The AI server is expected to usher in a new round of procurement demand, and the company is expected to continue to benefit. The company acquired 52% of the shares of IDE tool software developer Aipuyang and completed the formal settlement in July. It is expected to open up incremental space in the future.
Risk warning: Localization process falls short of expectations; market competition intensifies; core technology cannot meet market demand.