Optimistic about the company's leading position in the digital economy and innovation, and maintaining a “buy” rating

We maintain the company's net profit forecast for 2023-2025 at 477, 610 million yuan, and 763 million yuan. The current stock price corresponds to 47.5, 37.1, and 29.7 times PE for 2023-2025, respectively. Considering the company's leading position in the digital economy and innovation, we maintain a “buy” rating.

Gross margin has increased dramatically, and the results of improving quality and efficiency have been remarkable

In the first half of 2023, the company achieved operating income of 3.01 billion yuan, a year-on-year decrease of 34.97%; realized net profit of 507.06 million yuan, an increase of 37.79% over the previous year. Among them, Q2 achieved revenue of 1,356 billion yuan in a single quarter, a year-on-year decrease of 55.74%; net profit to the parent group was 23.324,800 yuan, an increase of 28.75% over the previous year. The decline on the revenue side was mainly affected by factors such as macroeconomics and delays in customer tenders. The company's gross sales margin in the first half of the year was 28.80%, an increase of 9.89 percentage points over the previous year, mainly due to a decrease in the share of integrated businesses with low gross margins.

The absolute amount of the company's gross profit for the first half of the year was 922 million yuan, a slight decrease of 0.97% from the previous year. On the cost side of the period, due to early redemption of convertible bonds issued by the company, the balance ratio decreased by 7.08 percentage points compared to the end of 2022, saving the company more than 30 million yuan in financial expenses, and the financial structure was optimized.

Vigorously develop the “cloud+data” service business and actively explore data element development opportunities. On the one hand, in the first half of the year, the company further strengthened marketing and product iteration of the government cloud, state-owned cloud and innovation cloud. The cloud service business gradually extended to the local and municipal levels. In the first half of the year, it successfully won bids for smart city cloud infrastructure and platform construction in Suizhou City in Hubei Province, Pingxiang City in Jiangxi Province, Shenbei New District of Shenyang City, and Jinpu New District of Dalian City. The company's cloud service business achieved revenue of 480 million yuan, an increase of 33.76% over the previous year. On the other hand, based on the “cloud+digital+application” integrated model, the company built a cloud digital infrastructure system and explored the development and utilization of data assets. In the first half of the year, the company successfully won bids for data service projects such as Beijing's big data catalogue system and data governance, Beijing's urban code capacity expansion and integrated operation construction, Guangdong “Internet+ Supervision” platform upgrade and operation service, Jiangxi provincial e-government cloud platform data sharing and exchange platform upgrade, Beijing education big data integration and data information product service, etc., to promote data resource sharing and circulation and help the development of the data industry.

Risk warning: reduction in government spending; risk of impairment of goodwill.