Main points of investment

Event: Xuanya International released the 2023 mid-term report. In the first half of 2023, the company achieved operating income of 441 million yuan, an increase of 4.97% over the same period last year, a net profit of 5 million yuan, a decrease of 83.21%, and a non-return net profit of 4 million yuan, a decrease of 85.67% over the same period last year. Of this total, the company's operating income in the second quarter was 212 million yuan, down 7.31% from the same period last year; the net profit returned to the mother was 3 million yuan, down 82.29% from the same period last year; and the non-return net profit was 3 million yuan, down 83.72% from the same period last year.

The overall business situation is stable, and the innovative business continues to be explored. 1) intensified competition in the industry: in the first half of 2023, the overall competition in the Internet advertising and marketing industry intensified, with the company's gross profit margin falling to 17.26%, a year-on-year decrease of 5.80pcts. 2) Business market expansion: the company steadily promoted the development of its main business, continuously improved its comprehensive marketing service capability, and strengthened its synergy with partners. The sales expense rate in the first half of the year was 9.29%, an increase of 2.55pcts over the same period last year. The rate of management expenses was 3.93%, which was 0.82 pcts lower than the same period last year, and the rate of R & D expenses was 0.53%, which decreased 1.10pcts compared with the same period last year.

The financial media is advanced at a high speed, and the OrangeGPT is deeply empowered. 1) Marketing main business: the company has ploughed the automotive industry for many years, formed an efficient operation mode of "big data + AI", and established a brand communication service model with user lifecycle operation + platform recommendation as the core, data science as the guidance, and marketing process automation to reduce costs and increase efficiency, so as to attract the head customers of various industries to carry out advertising business cooperation. 2) Financial media platform: the company has joined forces with Xinhua News Agency to focus on building a "video intelligence network" that unifies the online management, service, operation and distribution platform of local financial media. The first phase of the product has been launched and put into use. It has the basic function of establishing a local financial media alliance. At present, it has docked more than a thousand local financial media centers, covering Northeast, North China, East China, South China, Central China, Southwest and Northwest China. The speed of access is much faster than expected, and the pace of commercial realization is expected to be greatly ahead of schedule. 3) OrangeGPT:

The OrangeGPTV1.0 built by the company relying on the AI capability of the Julang technology platform and the key core technology of GPT has been tested and used within the company, using AIGC technology to enable copywriting, pictures, creativity and other creative work to reduce costs and increase efficiency. In addition, the company will join hands with Yunque intelligently to create a large model of the automotive industry and develop enterprise-class solutions for the B side, which is expected to create a new growth engine. 4) Project co-construction: the company actively embraces technological change and has established strategic partnerships with leading companies such as JD.com Technology, Baidu, Inc., ZTE Corporation, InBev Digital, BABA and other leading enterprises. will jointly explore the landing of artificial intelligence technology, virtual reality technology, cloud rendering, smart city, digital factory and other applications / programs. 5) on-site Cloud Enterprise Edition: since its launch in 2021, the on-site Cloud Enterprise Edition jointly developed by the company and Xinhua News Agency has deployed enterprise customers in various industries such as energy, finance and new consumption and provided operation and maintenance services. in the future, product iteration and customer expansion will continue to improve communication efficiency in an all-round way.

Profit Forecast: we slightly adjust the profit forecast and expect the company's 2023-2025 net profit to be 0.56, 0.74 and 0.95 million, respectively. The PE of the previous share price (August 30, 2023) is 34.1 times that of 43.8 scarp, maintaining the "overweight" rating.

Risk tips: macroeconomic and emergency risk, industry competition risk, network regulatory policy risk, technology upgrade iteration risk, product continuous innovation risk.