Incidents:

The company released its semi-annual report for 2023 on August 30, 2023. In the first half of 2023, it achieved revenue of 138 million yuan (+41.38% compared to the previous year), realized net profit of 190 million yuan (-14.71% year on year), and realized net profit of non-attributable net profit of 210 million yuan (-14.75% year on year).

Investment summary:

The first half of 2023 achieved 138 million yuan, with a revenue growth rate of 41.38%. The growth rate remained above the equity incentive plan, in line with expectations. The main reason for the year-on-year revenue recovery was that as external environmental factors subsided, the pace of implementation and delivery of products and services gradually returned to normal, and software and service revenue both increased significantly during the reporting period.

On the business side, the growth rate of the big data basic software business continues to improve. Among them, the distributed relational database software, data development and intelligent analysis tool software business performance is outstanding. We believe that the company has long-term development potential. In the context of a big model and Xinchuang two-wheel drive, the company uses its technical advantages to promote a full range of product upgrades, and the company's competitiveness has further improved.

Big data and cloud infrastructure platform: Revenue for the first half of 2023 was 32.9908 million yuan, up 36.9% year on year. The company launched a full range of new products, released 9.3 versions of the big data basic platform for TDH, which supports 11 models of unified data storage and management; the data cloud platform TDC launched version 3.2 to improve the flexibility and utilization rate of scheduling resources, and achieve isolation capabilities for multiple tenants.

Distributed relational databases: Revenue for the first half of 2023 was 10.1637 million yuan, a year-on-year growth rate of 48.3%. Among them, the distributed analytical database ArgoDB6.0 further enhanced real-time analysis capabilities. It can replace foreign products such as Oracle, DB2, Teradata, and SAPHANA in scenarios such as batch processing, OLAP, and adhoc analysis; KundB 3.2 enhances the high availability and cross-data center disaster recovery capabilities and compatibility with Oracle based on Paxos consensus algorithms, making it possible The product is more competitive.

Data development and intelligent analysis tools: Revenue for the first half of 2023 was 25.308 million yuan, up 203.0% year on year. The company launched Navier 3.1, a data element circulation product, and Defensor 4.0, a security protection tool. Under the premise that there are labeled samples, the identification accuracy rate reached 95%. Additionally, the company launched the big model training tool Sophon LLMOps to help enterprises build their own big models for the industry.

In terms of innovation, the company accelerated the layout around big models and data elements, opening the ceiling for growth.

Vector databases: Transwarp Hippo, an enterprise-level vector database, was launched. It can store, index, and manage vector data sets to expand the temporal and spatial dimensions of large models. The increase in training and applications of large multi-modal models will drive the rapid growth of vector databases, and this business is expected to become another engine for the company's growth.

Big model: It was the first to release two big models in the field, aimed at promoting the popularization of financial analysis and big data analysis. Among them, “Infinity” uses high-quality texts including research reports, announcements, policies, and news as training materials for the basic model, constructs a set of basic factors for six major models, including policy, public opinion, ESG, risk, volume and price, and the industrial chain, and realizes a new paradigm of intelligent quantitative investment and research. “Search” allows non-professional users to freely query data as needed through natural language on the premise that they do not need to learn or master database programming languages, lowering the threshold for using big data analysis.

Investment suggestions: As a domestic big data company, the company has advanced distributed database product technology and a high revenue growth rate. At the same time, the company is leading the vector database product industry and pioneered the “endless” financial quantitative model. Driven by both innovation and the big model, the company is expected to further expand its performance scale. The company's revenue for 2023-2025 is estimated to be 526 million yuan, 727 million yuan, and 1,014 million yuan respectively, corresponding to year-on-year increases of 41.0%, 38.3%, and 39.6%. The PS corresponding to the latest closing price on the reporting day is 19.97x, 14.44x, and 10.34x, respectively. Referring to the average PS of comparable companies, we gave the company a reasonable valuation of 25 times PS in 2023, corresponding to a target market value of 13.25 billion yuan, and a corresponding target price of 109.5 yuan. Keep the “buy” rating unchanged.

Risk warning: product structural risks; industry competition risks; global externalities; data security risks, etc.