Main points of investment

The company's revenue grew steadily in the first half of the year, and at the upward inflection point, 2023H1 achieved operating income of 417 million yuan, YOY + 3.27%; net profit of 26 million yuan, YOY + 32.82%; excluding the impact of employee stock ownership plan and equity incentive fees, the net profit of 36 million yuan, YOY + 80.96%. Among them, 2023Q2 realized revenue of 243 million yuan, YOY + 3.28%, net profit of 33 million yuan and YOY + 44.20%, turning losses into profits.

From a sub-industry point of view, the related business of the main transportation industry continues to grow. 2023H1 transportation industry business revenue 313 million yuan, YOY + 2.67%, gross profit 44.63%, down 0.41 pct year-on-year; government and national defense industry business revenue 59 million yuan, YOY-17.06%, gross profit margin 33.04%, down 8.77 pct; other industries business revenue 45 million yuan, YOY + 61.41%, gross profit 19.09%, increased 2.84pct over the same period last year.

From a product point of view, the revenue of command and dispatching products and intelligent application products have increased. 2023H1's command and dispatching revenue is 276 million yuan, YOY + 9.13%, gross profit 42.80%, up 1.52 pct year on year; intelligent application revenue 82 million yuan, YOY + 7.92%, gross profit 28.77%, down 4.78 pct; industry Internet of things application revenue 51 million yuan, YOY-21.86%, gross profit 45.79%, down 11.49 pct.

Railway 5G + Belt and Road Initiative to broaden the growth space of the company

With the acceleration of railway information construction, the company's forward-looking layout AI technology is expected to be the first to benefit. According to the Ministry of Transport, China's railway fixed asset investment in the first half of 2023 is 304.9 billion yuan, and YOY+6.9%, is expected to reach 760 billion yuan in 2023, YOY+7.6%. The National Railway Group said that it aims to put more than 3000 kilometers of new lines into production in 2023, which is lower than the average level of previous years, and we expect the proportion of information investment to increase. As the leader in the field of railway intelligent dispatching system, the company has covered 18 railway bureaus and has a leading position in the industry, and has set up an intelligent research institute to look forward to the layout of AI technology, which is expected to fully benefit from railway informatization.

Railway 5G continues to advance, which is expected to contribute to performance flexibility. 5G-R is expected to become a new generation of railway mobile communication standard, accelerate the technological attack at home and abroad, and some scenes have been landed in Europe. The intergenerational handover of railway mobile communication system will drive the upgrading and iteration of relevant modules, products and solutions, and bring performance flexibility for the company.

The company actively participates in "Belt and Road Initiative" going out to sea, and its products and solutions occupy a dominant position. Railway infrastructure is a key project of "Belt and Road Initiative". The company has undertaken many key international projects such as Yawan high-speed railway and China-Laos Railway, and has signed an overseas communication system project with strategic partner Huawei. The technology has been verified and has rich experience. Establish long-term and stable cooperative relations with customers, and expect to further open overseas market space in the future.

Continue to buy back part of the company's shares for employee shareholding or equity incentive plan on August 25, 2023, the board of directors examined and approved a new buyback plan, which intends to use its own funds to buy back part of the company's shares through centralized bidding transactions, with a total capital of 0.25-50 million yuan. The number of repurchased shares is expected to account for 0.47% of the current total share capital. 0.94%. The company's last two share buybacks will be used to implement employee stock ownership plans or equity incentive plans. The company had just completed a share buyback plan to buy back 0.80% of its shares with a centralized bidding as of August 23, 2023, with a total amount of 26 million yuan. The company's continuous share buyback is conducive to further improve the long-term incentive and restraint mechanism, reflecting the management's confidence in the inherent value and development prospects of the company.

Profit forecast and valuation

The company is a leading intelligent command and dispatching whole industry chain solution provider, focusing on the new ICT, helping customers in rail transit, national defense, customs and other industries to achieve intelligence. Railway information construction lays a solid foundation for performance, railway 5G is expected to drive a new round of product iterations, AI+ products will be applied in transportation, national defense, customs and other industries, and the construction of "Belt and Road Initiative" will broaden the market space. It is estimated that the 23-25 return net profit is 0.90,1.40 and 182 million yuan, and the current market value (closing price on August 25, 2023) is 37, 24 and 18 times PE for 23-25, maintaining the "buy" rating.

Risk hint

The investment in railway informatization is not as expected; the construction of Belt and Road Initiative project is not as expected; the competition in the industry is intensified.