Incident The Company released its 2023 Interim Report: In the first half of 2023, the company achieved total operating income of 5.722 billion yuan, down 26.09% year on year; net profit attributable to shareholders of listed companies was 71 million yuan, up 10.73% year on year; net profit not attributable to parent company was 70 million yuan, up 8.46% year on year.

Among them, 23Q2 achieved operating income of 2,926 million yuan, a year-on-year decrease of 20.03%; net profit attributable to shareholders of listed companies was 33 million yuan, up 13.56% year on year; net profit not attributable to parent company was 32 million yuan, up 12.15% year on year.

The “AI+” model fully empowers all businesses and helps the company reduce costs and increase efficiency during the reporting period. During the reporting period, the company promoted the upgrading of digital marketing to smart marketing, such as using AIGC technology to achieve technical output in scripting, video layout, video rendering optimization, and AI virtual person video content production.

According to preliminary assessments, the per capita advertising creative production capacity can be increased by more than 100% through technology empowerment. The company's virtual digital talent business continues to develop. The “Jun Ruojin” live broadcast increased by 2W+ in 2 hours, click-through rate increased 1.5 times, viewing interaction rate increased by 5%, average time spent on live streaming was 5 times higher than the industry level, and sales volume increased nearly 2 times. The effects of the “Digital Man” live broadcast have clearly changed.

Consolidate high-quality customer resources and focus on breaking through new energy vehicle customers. During the reporting period, the company used its leading advantages to highlight brand value, continued good partnerships in the performance marketing business sector, maintained close cooperation with leading media such as Massive Engine, Tencent, and Kuaishou, and obtained many agency rights in the e-commerce circuit. The company focused on breaking through new energy vehicle customers, using subsidiaries in the South China region to quickly open up the situation, achieved breakthroughs from customers such as BYD and continuous cooperation with Dongfeng Nissan customers, and obtained customer resources from BYD, Xiaopeng Motors, Changan New Energy, and Chery New Energy. Optimistic about the company's subsequent incremental customer revenue contributions.

Investment recommendations We expect the company's net profit attributable to shareholders of listed companies from 2023-2025 to reach 274/3.26/368 million yuan in sequence, an increase of 239.21%/18.99%/12.87% over the previous year. The corresponding EPS is 0.18/0.22/0.25, and the corresponding PE is 33x/27x/24x respectively, maintaining the “recommended” rating.

Risks indicate the risk of concentrated media traffic suppliers, the risk of tax policy risks, the risk of new business falling short of expectations, the risk of increased market competition, and the risk of macroeconomic fluctuations.