The company disclosed its semi-annual report for 2023. 23H1's revenue was 1.2 billion yuan, -6% year on year; net profit was 22 million yuan, -36% year on year; net profit after deducting non-return net profit of 118 million yuan, +373% year on year.

ARR is growing rapidly, and international business is progressing smoothly. At the end of June 2023, ARR reached 342 million yuan, +45% year-on-year, and the growth rate increased significantly from '22 (+30%). With the rapid launch of the core products InfrasysCloud (Cloud POS) and SEP (Cloud PMS), the annual ARR growth rate is expected to exceed 50% year-on-year. Currently, the core driver of the company's growth is international business, and this business still accounts for a small share of the company's total revenue (23H1 is 17.2%). Therefore, it is difficult for the overall revenue and profit performance of the financial report to clearly show the development trend of this business, and ARR is currently the core tracking indicator.

The SEP batch launch has begun, and it is rapidly entering a broad market. We have emphasized many times in our recent weekly industry report that SEP will gradually enter the batch delivery and launch period at 23H1. As revealed in the Interim Report, “IHG's hotels in China have begun to be launched in large numbers and are close to the goal of deploying 30 hotels per month,” which validates our previous judgment. As of 23H1, SEP has launched a total of 135 hotels in Peninsula, Intercontinental and other hotel groups. According to our previous estimates, SEP's potential market space is about RMB 118 billion, corresponding to about 47,000 hotels. Currently, the more than 100 hotels that have been launched are just the beginning.

Infrasys Cloud was quickly launched to help realize value. Infrasys Cloud is the only cloud POS product that has signed a contract with all globally influential TOP5 international hotel groups, and is expected to occupy most of the global market share (potential market space is about 4.7 billion yuan). As of 23H1, the total number of online cloud POS products was 3502, a net increase of 415 over the beginning of the year. Although the product has less potential market space than cloud PMS, its rapid launch will significantly accelerate the realization of the company's value.

Profit forecasts and investment recommendations. It is estimated that in 23-25, the company's total revenue will be 2,604 billion yuan, 2,823 billion yuan, and 3.309 billion yuan respectively. Referring to the latest valuation of comparable companies, we gave the company a 20X PS valuation multiplier. Based on the expected revenue for 23 years, the corresponding reasonable value was about 19.08 yuan/share, maintaining the “buy” rating.

Risk warning. Uncertainty about the pace of procurement and launch of new products by high-end hotel groups; uncertainty about the impact of geopolitics on the final share of SEP; risk of impairment of goodwill.