Investment events: The company released its semi-annual report for 2023: the company's 2023 H1 revenue was 696 million yuan, up 30.10% year on year; net profit to be 409 million yuan, loss increased 9.99% year on year; net profit after deducting non-return net profit - 422 million yuan, loss increased 9.74% year on year.

The growth rate of emerging security is obvious, and the revenue of operators and the Internet communication industry has achieved a high growth rate. In 2023, H1's revenue was 696 million yuan, an increase of 30.10% over the previous year. The company's product market share continued to expand, achieving a high revenue growth rate. By product, revenue from cybersecurity platform products increased by nearly 40% year on year, and revenue from cybersecurity services increased by more than 46% year on year. The company's emerging security growth rate is obvious. During the reporting period, 1) revenue from new data security products grew more than 60% year on year; 2) Xinchuang security products increased by more than 300% year on year; 3) MSS business increased by more than 100% year on year; 4) terminal security increased by nearly 40% year on year; 5) continuous breakthroughs were made in password security and vehicle network security. The company's legion strategy is also being comprehensively deepened. In the first half of the year, the company continued to integrate and upgrade the market, adding transportation, energy, and commercial intelligence corps to the five major industrial groups of operators, public security, finance, Internet communication, and big data bureaus. The company vertically manages various industry segments through the Corps to achieve collaboration across multiple departments within the company. By industry, the company achieved a revenue increase of nearly 90% compared to the same period last year; in the network information industry, revenue increased by more than 70% compared to the same period last year; in the education, medical and other industries, revenue increased by more than 50% compared to the same period last year; and achieved revenue growth of nearly 30% in the government and transportation industries compared to the same period last year.

Gross margin has been steadily increasing, and results in cost reduction and efficiency have been remarkable. As of 2023 H1, the company's gross margin was 53.92%, an increase of 0.8 pcts over the previous year. The company continues to promote cost reduction and efficiency through strict budget management, supply chain management, and resource allocation. The overall cost growth rate of the three fees dropped sharply compared to the same period last year. During the reporting period, the company's sales expense rate/R&D expense rate/management expense ratio were 64.35%/48.32%/14.52%, respectively, down 0.08/9.17/2.62 pcts from the same period last year. The company's net profit margin increased from -69.64% of H1 in 2022 to -59.49% of H1 in 2023. The decline in net profit narrowed significantly compared to the same period last year, and the company's profitability is recovering.

The competitiveness of core products continues to improve, and the “Hengnao Safety Vertical Big Model” was released. The competitiveness of the company's core products continued to improve. 1) In terms of cloud security, revenue continued to grow steadily. Among them, customers in operators, big data and other industries all achieved significant growth. At the same time, the company's Xinchuang Cloud Security layout also generated significant benefits in the first half of the year; 2) In terms of big data situation awareness, the company continued to refine situation sensing technology and solutions, and situation perception revenue increased by more than 40% year-on-year; 3) In terms of IoT security, the company continued to increase R&D investment in product fields such as IoT asset mapping, IoT security access, and IoT security sensing and management. %; 4) In terms of safety services, in the future, the company will also rely on the brand advantages of Universiade and Asian Games to fully introduce a normalized operation model suitable for various scenarios, further consolidate the company's leading position in the industry, and promote the company's sustainable high-quality development in the future. On August 28, 2023, the Heng Nao Safe Operation Platform was unveiled for the first time. The security operation platform based on the Safety Vertical Model was newly upgraded. The Anheng Safety Operation Platform is a product that combines AI artificial intelligence, machine learning technology, and security orchestration. The combination of the Hengnao Security Supervisory Model and the Anheng OpenSecurity Competency Center realizes the link between “smart brain” and “diligent hands and feet”. In the future, Anheng Information will provide intelligent integrated solutions for “perception,” “decision making,” “execution,” and “feedback.” Intelligent entities will gradually grow into virtual security experts, as future “all-around co-pilots” and walk with security experts.

Investment suggestions: We expect the company's revenue to be 26.77, 3.601 billion yuan, and 4.682 billion yuan in 2023/2024/2025, an increase of 35%, and 30% over the previous year; the company's net profit is 0.2, 226 million yuan, and 527 million yuan. The company's EPS for 2023/2024/2025 was 0.26/2.87/6.68 yuan respectively, corresponding to 594.7/53.4/22.9 times PE. Taking into account high revenue growth and profit improvements, it was given a “buy” rating.

Risk warning: business risk, new market development risk, company business progress falling short of expectations, increased market competition