Incidents:
The company released the 2023 semi-annual report. In 2023H1, the company achieved operating income of 937 million yuan, an increase of 1.30% over the previous year; net profit of 89 million yuan, an increase of 26.37% over the previous year; net profit after deducting non-return net profit of 94 million yuan, an increase of 27.72% over the previous year.
Q2 Performance growth is accelerating, and overseas revenue is growing steadily. On a quarterly basis, the company achieved revenue of 534 million yuan in a single quarter in 23Q2, +8.41% year-on-year; realized net profit of 57 million yuan, or +39.67% year-on-year. The growth rate of performance in Q2 increased significantly compared to Q1. By business, 23H1 smart gateway management product revenue was 685 million yuan, +0.94% year on year; smart office product revenue was 172 million yuan, +18.71% year on year; and smart identity verification product revenue was 77 million yuan, -22.32% year on year. By region, domestic revenue was 307 million yuan, -18.78% year on year; overseas revenue was 631 million yuan, +15.15% year on year.
Gross margin increased sharply year over year, and operating cash flow improved dramatically. The company's gross margin in 2023H1 was 47.83%, a sharp increase of 5.03 pct over the previous year. Since more than 90% of the company's operating costs are raw materials, the increase in gross margin may be due to falling prices of raw materials such as upstream electronic components.
In terms of cost rates, the company's sales, management, R&D, and financial expenses rates for the first half of the year changed by 2.7/0.53/0.82/-2.1 pct, respectively. The overall cost rate increased slightly during the period. In terms of cash flow, the company's net operating cash flow for the first half of the year was 131 million yuan, compared to -022 million yuan for the same period last year, a significant improvement over the previous year.
Deploy multi-modal BioCV artificial intelligence technology, and smart retail has broad prospects. The company applied multi-modal AI technology to the field of smart retail and launched ZKDIGIMAX Level3 digital marketing solutions for traditional small and medium-sized retailers. The solution provides five core services, including Minerva IoT IoT platform, machine vision analysis platform, big data analysis platform, AIGC platform, advertising production and distribution platform, and corresponding intelligent terminals. In addition, the company has focused on laying out the basic technology of the general large model, and has launched the BioCV LLM3.0 self-developed large model project, which can be applied to intelligent shopping guidance, product advertisement content generation, and online and offline interactive experiences. With the gradual implementation of smart retail, it is expected to lead the company to a new round of growth.
Investment advice: The company focuses on biometric technology and is in a leading position in the industry. Using the advantages of BioCV technology to lay out smart retail business and achieve scenario innovation, it is expected to usher in new development.
Currently, gross margin has been steadily improving, and profits have resumed an upward trend. The company's EPS for 2023-2025 is expected to be 1.29/1.65/2.04 yuan respectively, maintaining the “buy” rating.
Risk warning: Technology development falls short of expectations; smart retail layout progress falls short of expectations; upstream raw material prices rise; industry competition intensifies.