Introduction to this report:

The company's 2023H1 performance is under pressure, mainly due to investment income from the private equity business. It is expected that as the scale of new funds increases and old fund projects withdraw to redeem performance rewards, the company's future performance will be released at an accelerated pace.

Key points of investment:

Maintaining the “increase in holdings” rating, maintaining the target price of 33.16 yuan, corresponding to the 2023 16xP/E: the company's 2023H1 adjusted revenue (including private equity investment income) was 917 million yuan, -12.97% YoY, net profit of 455 million yuan, -12.92% YoY, in line with expectations. We maintain our 23/24/25 net profit forecast of $16.21/26 billion, corresponding to an EPS of $2.11/2.69/3.44. Maintain the “increase in holdings” rating and maintain the target price of 33.16 yuan, corresponding to 16xP/E in '23.

The decline in 2023H1 performance was mainly hampered by private equity investment income: private equity investment income in the first half of 2023 was 356 million yuan, -18% year-on-year, contributing 56% of the decline in revenue. The decline in investment income is mainly due to: 1) the delay in listing of the company's various projects awaiting IPO, such as Yitang Semiconductor, Jiehydrogen Technology, and Honeycomb Energy; 2) Based on corporate accounting standards, “the company is expected to receive 1.1 billion yuan in excess performance compensation” was not included in profits for the first half of 2023. At the same time, the company's private equity business management fee revenue was -16% year-on-year, mainly due to the gradual withdrawal of the company's old fund projects, leading to a decline in the scale under management. The company's cement business was under pressure in the first half of the year, with revenue falling 8% year on year. This was mainly due to weak overall demand due to a slowdown in downstream projects in the first quarter, compounded by competitors' low price strategies and price pressure due to declining cement market conditions.

The scale of the new fund is gradually increasing, the old fund projects are gradually withdrawing to cash out the income, and they are optimistic about the accelerated release of future performance: the total amount of the company's new fund pledges has reached 5.15 billion yuan, which is expected to lead to a positive increase in management fee revenue as the scale increases. Many of the company's old fund projects, such as Aojie Technology and Zhi Ou Technology, have already been listed on the Science and Technology Innovation Board. Many other projects are also in the listing process. The listing and subsequent exit will accelerate the realization of the company's follow-up investment income and performance rewards, and the release of performance will accelerate.

Catalyst: The company's new fund raising is speeding up.

Risk warning: The prosperity of the private equity investment industry has declined, and regulatory policies have changed.