Description of the event

The company released its semi-annual report for 2023:2023H1, with revenue of 2.193 billion yuan, yoy +7.89%; net profit of 217 million yuan, yoy +0.55%; net profit of 214 million yuan after deducting non-return net profit of 214 million yuan, yoy +32.97%. Net profit for the first half of the year was mainly affected by a large decrease in investment income compared to last year, but the performance after deducting non-attributable net profit was in line with expectations and superior to the industry average.

Incident comments

Looking at a single quarter, the company achieved revenue of 1,262 billion yuan, yoy +10.93%; realized net profit of 76 million yuan, yoy -51.17%; realized net profit of 131 million yuan after deducting non-return net profit of 131 million yuan, yoy +27.59%.

Old customers are stable, and new customers continue to expand continuously. During the reporting period, the company promoted CCTV and other media special program delivery projects, and carried out brand advertising for telecom operators, financial and other industry customers; for China Resources Group, China Mobile, Yili and leading automobile customers, SAIC GM Buick, FAW-Toyota, Dongfeng Honda, FAW Audi, Dongfeng Fengshen, and FAW Volkswagen; at the same time, the scene activity business and campus media social media marketing services were successfully implemented. The smooth development of various businesses has ensured the steady growth of the company's main business.

Continuously expand business boundaries and forward-looking layout in the fields of AI and data elements. The current layout of the company in forward-looking fields is as follows:

1) AI+ advertising and marketing to embrace new changes in the industry. In addition to showing strong resilience in traditional businesses, the company is actively embracing the big wave of AI and exploring a new era of AI+ marketing. The AI application race track is currently the focus of the market's attention. We believe that AI is a new revolution in the advertising and marketing industry. The core element of the advertising industry is the material generation and delivery model. AIGC's transformative empowerment of the industry is mainly reflected in: 1) Material generation: AIGC can efficiently capture the most popular elements in the market while generating effective advertising materials more quickly. 2) Model optimization: AIGC can improve user tag accuracy, thereby improving user matching and platform traffic utilization, revitalizing long-tail channel traffic, and empowering traditional marketing processes across all links. The company and iFLYTEK have joined forces to collaborate on small models, and AI+ marketing is leading the industry revolution. The two sides make full use of iFLYTEK's technical and product advantages, as well as the trio's resource advantages, to jointly enhance smart marketing capabilities through AI empowerment to help small and medium-sized customers.

2) The data element market is gradually regulated, and the company actively lays out to seize new opportunities in the industry. The company responded positively to the “digital economy leads the development of the real economy” policy, carried out strategic cooperation with the Guiyang Big Data Exchange to build a big data trading platform to drive future industrial development, took the lead in exploring data element market cultivation in the country, and fully unleashed the value of data elements. By enriching the supply of high-quality data, expanding data transaction requirements, actively promoting data trading, and improving and optimizing the exchange market maker system, we can help relevant customers achieve innovative breakthroughs in the field of data element capitalization. On April 19, 2023, the company and its important partner Guiyang Big Data Exchange Limited Liability Company reached a strategic cooperation to build a big data trading platform that drives future industrial development to meet customers' data procurement and data trading business needs in addition to their original advertising and marketing needs. Telecom operators, banks, insurance, etc. that the trio has been serving for a long time have their own data and corresponding data procurement needs. As a media procurement agent for such cooperative customers all year round, the company can also provide customers with data procurement agency services.

Investment suggestions: The company is expected to achieve net profit of 1,023/1,311 billion yuan in 2023-2024, corresponding to 10.77/8.41 times PE.

Risk warning

1. Advertisement repair falls short of the expected risk;

2. New business implementation falls short of anticipated risks.