The company released its 2023 mid-year report, and its performance grew steadily. In 2023H1, the company achieved operating income of 147 million yuan, an increase of 25.64% over the previous year; realized net profit of 119 million yuan, an increase of 23.71% over the previous year; achieved net profit of 95 million yuan after deducting non-return net profit of 95 million yuan, an increase of 18.99% over the previous year. Looking at 2023Q2 alone, the company achieved operating income of 82 million yuan, an increase of 19.35% over the previous year; realized net profit of 63 million yuan, an increase of 22.35% over the previous year; and achieved net profit of 53 million yuan after deducting non-return net profit of 53 million yuan, an increase of 13.52 percent over the previous year.

Boosted by the reform of national secrets and Xinchuang, B-side business revenue increased dramatically. At 2023H1, the company's software sales and maintenance services achieved revenue of 57 million yuan/56 million yuan respectively, an increase of 39.52%/31.20% over the previous year. B-side business revenue accounted for more than 75% of the company's revenue. Performance guarantee mainly came from securities companies' national secret and innovation needs. The core brand “Tongdaxin” has covered more than 90% of domestic securities companies with brokerage qualifications, and continues to expand product categories and overseas markets. At the same time, the company is also comprehensively speeding up the construction of fund-raising projects, continuously adjusting and optimizing the product structure, supported by technology and R&D innovation, and helping the digital transformation of the securities industry in terms of national secret transformation, innovative software, and a “multi-end collaborative digital center”.

Deepening capital market reforms bring development opportunities, and C-side businesses are expected to benefit. At 2023H1, the company's securities information service achieved revenue of 34 million yuan, an increase of 1.82% over the previous year. As active capital market policies such as halving the levy of stamp duty and reducing the financing deposit ratio to 80% are introduced one after another, the company's C-side business is expected to benefit from increased market transaction activity. The company has a certain degree of accumulation and advantage in data resources, product development and technological innovation, etc., and cultivates value-added business customers through free clients. It is expected that the number of customers will continue to grow. According to data from Yiguan Qianfan, in July 2023, the company's Tongdaxin app had a monthly activity of 1,8631 million people, maintaining a growing trend. At the same time, the company continues to conduct in-depth research in the fields of generative AI, language models, etc., using AI technology to enhance the competitive advantage of products, enhance the natural language understanding (NLP) performance of existing products, and bring users a better user experience.

[Investment advice]

The company is a leading enterprise in the domestic securities IT industry. In the context of domestic financial technology innovation, business model innovation, and steady development of the industry, the company is expected to achieve a steady increase in B-side business revenue with a good product reputation, solid core technology, and rich ongoing research projects. The company's C-side business is expected to benefit from policy incentives and AI empowerment to achieve a continuous increase in the number of users and payment penetration.

We maintain our previous profit forecast. We expect the company's operating income to be 463/570/664 million yuan respectively for 2023/2024/2025, and net profit of 387/475/532 million yuan respectively. The corresponding PE is 58/47/42 times, respectively, maintaining the “buy” rating.

[Risk Reminder]

The growth in securities IT investment fell short of the expected risk;

Competition in the industry heightens the risk;

Policy regulation risks.