The company's 2023H1 revenue grew rapidly, the business structure continued to be optimized, and the basic software business performed well. The company's three product lines of big data and cloud infrastructure, data development and intelligent analysis tools, and distributed databases continue to be iteratively upgraded to accelerate the digital upgrade of customers. Under the wave of AI models, data elements, and innovation substitution, the company's performance is expected to continue to grow rapidly. Maintain a “buy” rating.

2023H1 revenue increased by more than 40%, gross margin increased, and R&D investment remained high. 2023H1, the company achieved revenue of 138 million yuan, +41.4% year-on-year. As external environmental factors subsided, the pace of product and service implementation and delivery returned to normal, and revenue grew rapidly; gross margin reached 51.3%, +3.1 pcts, mainly related to business structure optimization; sales/management/R&D rates were 81.2%/49.7%/74.4%, respectively, -8.7/-9.4/-10.4 pcts, respectively. The three-fee rate dropped markedly, and the benefits of scale gradually became apparent; the company invested 1.05 billion in R&D in the first half of the year Yuan, +27.1% year on year, maintained rapid growth and improved product competitiveness.

The basic software business performed well, with financial/government customers accounting for over 60% of revenue. 1) According to business categories, the company's basic software business/technical services/application and solution revenue was 6846/3134/35.52 million yuan, compared to +74.2%/-9.1%/+67.9%, accounting for 49.7%/22.7%/25.8%, respectively. The basic software business performance was outstanding, service revenue continued to decline, and the business structure was continuously optimized; 2) According to the division of end customers, corporate finance/government industry revenue was 4463/43.39 million yuan, respectively, with a year-on-year ratio of +41.9%/+121.3%, accounting for a share of up to 41.9%/+121.3%. At 32.4%/31.5%, revenue from the government industry is growing rapidly. We infer that it is related to the acceleration of delivery and acceptance. The two major industries, finance and government, account for more than 60%, and are the core industries driving the company's business growth.

The three product lines continue to be upgraded, and competitiveness has further improved. 1) Big data and cloud infrastructure platform product line. The company released version TDH9.3 of the big data platform, which was iteratively upgraded on a multi-model unified architecture. A new vector model engine was released, which supports a total of 11 data models, and supports data flow and correlation analysis across models in a unified language; 2) Data development and intelligent analysis tool product line, data security protection tools, innovatively introduced big model technology to solve the problem of low semantic contextual recognition rate of short texts, with an accuracy rate of 95%. It released the big model training tool Sophon LLMOps, which provides model operation, maintenance, and task scheduling capabilities ; 3) Distributed database product line. The analytical database ArgoDB6.0 enhances real-time analysis capabilities and can replace foreign products in scenarios such as batch processing, OLAP, and adhoc analysis. The transactional database KundB3.2 enhances high availability and cross-data center disaster recovery capabilities based on Paxos consensus algorithms and compatibility with Oracle, and is expected to accelerate the replacement of overseas products. With the upgrading of multiple product capabilities, the company's competitiveness has further improved.

The layout is accelerated in the direction of large models and data elements, and long-term space can be expected. In the field of big models, the company launched 1) Sophon LLMops's tool chain to manage big models and corresponding applications; 2) the vector database Transwarp Hippo stores, indexes, and manages vector data sets to expand the time and spatial dimensions of big models; 3) the “endless” financial model and the big data analysis model “search” to promote the popularization of financial analysis and big data analysis, respectively. In the field of data elements, companies can develop technical cooperation with data exchanges or OTC operators to provide new business service models, including exploring independent cloud big data development and cloud database services. The company launched Navier 3.1, a data element circulation product. The transaction portal, secure sandbox, and private computing platform have all improved in terms of functional coverage, flexibility, and modeling effectiveness. Under the multiple waves of AI models, innovation and innovation, and the digital economy, the company's long-term space can be expected.

Risk factors: the risk of intellectual property and high-end technical talent loss; the risk of the company's new product development and expansion; the risk of increasing market competition; the risk of domestic alternative product implementation falling short of expectations; the risk of fluctuating customer IT expenses.

Profit Forecast, Valuation and Rating: Maintain the 2023-2025 operating income forecast of $547/791/1,124 million, and maintain the return net profit forecast of -1.74/-0.80/$65 million. Referring to the valuation levels of comparable companies Jinshan Office, Huada Jiutian, and Zhongwang Software (Wind unanimously expects 26xPS in 2024), considering that the big data and database industry has broad prospects and that the company has strong competitiveness, but its gross margin is lower than that of comparable companies, carefully gave the company 20 times PS in 2024, corresponding to a target market value of 15.8 billion yuan, equivalent to a target price of 131 yuan, and maintained a “buy” rating.