Incident: On August 27, 2023, Tongdahai released its 2023 semi-annual report. During the reporting period, the company achieved operating income of 197 million yuan, an increase of 5.14% over the previous year; net profit attributable to shareholders of listed companies - 5,5861 million yuan, which changed from profit to loss year on year.
Increased investment in R&D, and steady growth in revenue. During the reporting period, the company achieved operating income of 197 million yuan, an increase of 5.14% over the previous year; net profit attributable to shareholders of listed companies - 5.5861 million yuan; net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss - 7.564 million yuan, which changed from profit to loss over the previous year. In the first half of the year, the company increased investment in marketing promotion and R&D, focusing on the core business of “smart courts”, vigorously expanding the customer market segment, optimizing the organizational structure, increasing talent investment, continuing to promote product and service innovation and development, and planning and carrying out research and application implementation of artificial intelligence technology such as big models. In the first half of the year, the company invested 64 million yuan in R&D, an increase of 24.01% over the same period last year. Sales/management/financial expenses changed +22.58%/25.90%/-9.97%. According to past data estimates, the company's revenue for the first half of the year accounted for about 36% of the year. In the first half of 2023, under the influence of various factors such as slow overall economic recovery and seasonality, the company's revenue overcame adverse effects and maintained steady growth.
Enrich the product system, and key products continue to gain strength. The company continues to promote the application of independent products in banks, postal services, and bankruptcy administrators, and expand the coverage of products and services. Specialized products such as case deposit and withdrawal systems and illegal deposit absorption case management systems have been developed, further enriching the variety of banking products. During the reporting period, bank users signed new contracts amounting to 42.6021 million yuan, an increase of 161.31% over the previous year.
The intensive delivery business maintained a good momentum of development, achieving revenue of 17.8579 million yuan in the first half of the year, an increase of 48.28% over the previous year. The company focuses on court business, implements the strategy of sinking middle and grass-roots courts, improves the intelligent auxiliary application system for all fields of litigation, trial, execution and management, and improves the quality and efficiency of court execution work. During the reporting period, the company accelerated the intelligent upgrading of execution systems in the regions covered, completed the intelligent upgrading of execution and case handling platforms in 18 provinces, maintained a steady development trend, and achieved revenue of 307.419 million yuan, an increase of 22.81% over the previous year.
Leading the construction of smart courts, AI empowers laws to be implemented at an accelerated pace. The company focuses on “smart courts” and launches different products in various fields such as trial, execution, litigation, and management. Each product collaborates with each other to achieve innovation and integration in the court informatization business format, thereby improving R&D efficiency, reducing R&D costs, and forming the company's unique competitive advantage. Along with the global wave of artificial intelligence, AI continues to be implemented in downstream applications.
The OpenAI paper shows that GPT has a big impact on law-related careers, while Goldman Sachs says generative AI can replace 44% of legal work. The company serves domestic judicial informatization segments, leads the construction of smart courts, and promotes the 4.0 version of people's court informatization with the smart court brain as the core and the judicial data center as the driving force to continue to expand into deep fields. It is expected that related business will continue to expand.
Investment suggestions: We expect the company to achieve operating income of 586/7.40/933 million yuan respectively in 2023-2025, up 26.58%/26.28%/26.16% year on year; net profit for return to the mother to be 1.09/1.33/170 million yuan, respectively, up 24.99%/21.70%/27.68%; EPS is 1.58/1.93/2.46 yuan/share, respectively; the current stock price corresponds to PE 38/31/25 times, respectively. Maintain the “Recommended” rating.
Risk warning: risk of macroeconomic fluctuations; risk that technology research and development progress falls short of expectations; supply chain risk; risk that policy progress falls short of expectations; risk that consumer demand falls short of expectations; risk that industry competition increases.