Incident: The company released its semi-annual report for 2023. In the first half of 2023, the company achieved revenue of 390 million yuan, up 0.04% year on year, net profit of 45 million yuan, up 15.06% year on year; revenue for the second quarter of 2023 was 218 million yuan, down 6.45% year on year; net profit of 29 million yuan, up 0.96% year on year, and performance was slightly lower than previous expectations.

Short-term performance is under pressure and long-term improvements will not change, and the progress of final revenue is expected to accelerate in the second half of the year. The company's main business is aimed at people's livelihood, and is building a city-by-city resident service card service system and data product system. Following the Ministry of Human Resources and Social Affairs successively issued policies such as the “Notice on Launching Demonstration Work on the Innovative Application of the Social Security Card” and the “Notice on the 14th Five-Year Plan for the Development of Human Resources and Social Security Services”, in June 2023, the Ministry of Human Resources and Social Affairs issued the “Digital Social Security Construction Action Implementation Plan”, which proposes to actively promote a card for residents' services, use the social security card as a basic carrier for government livelihood services, implement the distribution of financial subsidy funds for the benefit of the people and farmers; promote social security cards in government services, medical services, transportation, and culture Applications in experience, tourism, rural revitalization, etc. As of August 2023, the number of card holders nationwide has reached 1.37 billion, covering 97% of the population, and the number of electronic social security card holders is 8.3 billion. There is still plenty of room for growth in the residents' service card business in the future. The company was affected by the macroeconomy in the first half of this year, and it is confirmed that the pace of revenue has slowed down, but the lack of related performance is expected to pick up in the second half of this year.

The data element circuit continues to gain strength, and the company focuses on data services for people's livelihood. As a key link connecting data asset operators and data consumers, data services play a critical role in the market-based development of data elements. With the continuous establishment and improvement of data exchanges such as Fujian, Guiyang, Guangzhou, and Shanghai, data service providers also continue to emerge, which has greatly promoted the circulation of data resources, and various provinces and cities such as Beijing, Hubei, and Guizhou have successively issued implementation rules on data security, data authorization, and data circulation, which will further enhance data flow efficiency and market transaction vitality. As a livelihood data service provider, the company is committed to forming a complete closed loop of “data precipitation”, “data development” and “data operation” based on various scenario applications of the Residents' Service Card, combined with employment services and credit verification, to form a complete closed loop of “data precipitation”, “data development” and “data operation”. It empowers people's livelihood security services with data products and operation services, enhances the effectiveness of social governance through scientific and technological innovation, and helps the government's public services to be “accurate” and “intelligent”.

Profit forecast and investment suggestions: The company's operating income for 2023-2025 is estimated to be 1,382, 18.11, and 2,373 billion yuan, and net profit to parent is 188, 2.57, and 348 million yuan, maintaining the “increase in holdings” rating.

Risk warning: The progress of issuing social security cards fell short of expectations, data business expansion fell short of expectations, and macroeconomic growth fell short of expectations