Benefiting from the recovery of domestic port business, the company's revenue and profits grew rapidly in the first half of the year, and its cash flow improved. The company's AI and Xinchuang layout is leading, overseas business is ready to start, and there are many growth points in the future, so it is strongly recommended.

Event: the company's first-half revenue is 804 million yuan, YoY+ 36.52%; return to the mother net profit 126 million yuan, YoY+ 58.98% (performance forecast 50% YoY+ 65%); deduction of non-return net profit 108 million yuan, YoY+61.30% (performance forecast 50% 65%). 23Q2 revenue / return net profit / deduction of non-return net profit YoY+18.21/94.10%/93.01%.

The recovery of domestic port business is good, while overseas business is ready to start. By business line, the revenue of Wisdom Port business in the first half of the year is 709 million yuan, YoY+ 42.57%; intelligent transportation and other revenue is 91 million yuan, YoY+0.56%. The rapid growth of smart port business mainly benefits from the full resumption of the opening up of the port and the in-depth construction of the smart port. In terms of policy, on March 20, the General Administration of Customs said that it would promote modern customs reform with intelligent customs as the starting point. In April, the State Port Office informed and decided to organize in-depth pilot construction of smart ports at ports across the country. In addition to the recovery of demand from the mainland, the demand for the construction of Hainan free trade port also continued to release, and the company successfully won the bid for Haikou Nangang passenger inspection facility project in the first half of the year. Overseas, the company has set up branches in Africa, Southeast Asia and other places, multi-project delivery is coming to an end, "Belt and Road Initiative" business is expected to become one of the core driving forces of the company's next stage of development.

The change of product structure drags down the performance of gross profit margin, good cost control and improved cash flow. The company's consolidated gross profit margin in the first half of the year was 41.34%, slightly lower than that of the same period last year (- 1.33pct). Among them, the gross profit margin of the main wisdom port business declined 5.33pct compared with the same period last year, which is expected to be mainly related to the decline in the proportion of self-developed products after the scale of a single project continues to grow in recent years. As the company continues to invest in self-research product development, it is expected that the drag on gross profit margin caused by product structure changes will gradually ease. In the first half of the year, the company's sales / management / R & D expenses YoY + 38.86% CPM 29.62% CPM 9.07%, among which the sales expenses such as "employee salary and welfare", "bidding expenses", "office expenses" and "travel expenses" increased rapidly, mainly due to the company's increased market expansion; the sharp decline in management expenses was mainly related to the reduction in amortization of share payment expenses. R & D costs have declined, mainly due to the slowdown in the expansion of R & D teams. In the first half of the year, the company adjusted the payback mechanism, the cash flow improved, the cash received by selling goods and providing services YoY + 35.91%, and the operating net cash flow YoY + 68.79%.

There are many interesting points in the layout of AI and Xinchuang. In terms of AI, in the first half of the year, based on the "Volcano" project created by AIGC technology, the company realized the application of AI algorithm technology of "small sample, large model", laid out and developed a new generation of products based on AI biometric identification technology, and the similar ChatGPT application incubated by multi-modal large model technology has been verified in domestic border inspection, customs and other scenes. In terms of Xinchuang, the company's products based on "Kunpeng + Teng + Euler" ecology have landed on the port project, and many series of self-developed terminal products have completed the comprehensive localization transformation of embedded hardware and operating system and achieved production delivery.

Maintain the "highly recommended" investment rating. It is estimated that the revenue from 2023 to 2025 will be 2.058 billion yuan and 2.776 billion yuan, with a net profit of 3.42 billion yuan and 667 million yuan. Continue to strongly recommend.

Risk tips: the landing of the policy is not as expected; the promotion of new products is not as expected; the industry competition is intensified.