Incidents:
The company released its semi-annual report for 2023. 2023 H1 achieved revenue of 527 million yuan/ +15.28%, net profit to parent - 113 million yuan/ +38.27%, net profit minus non-parent net profit - 0.3 million yuan/ +38.24%; 2023Q2 achieved revenue of 350 million yuan/ -13.32% in a single quarter, net profit of 119 million yuan/ +9.87%, net profit of 119 million yuan/ +8.48%. The performance was in line with market expectations.
Comment:
The air traffic control business drives overall gross profit growth, reduces costs and increases efficiency, and improves the business structure. The gross margin of 2023H1 was 30.18% /+2.03pct; the net margin was -2.04% /+1.62pct, and the sales/management/R&D expenses ratio was 9.68%/12.06%/11.36%, respectively, with year-on-year changes of +1.12%/+0.47%/-1.16%, respectively. During the reporting period, revenue from the air traffic control business increased, cost rate control was properly controlled, and cost reduction and efficiency continued to advance. Continued expansion of high-margin business will drive improvements in the industrial structure, which is conducive to improving the future profitability of enterprises.
Core business revenue has increased, and major projects in the field of air traffic control have continued to advance. The company focuses on the three major areas of traffic management, urban road traffic management, and urban governance in civil aviation. In the first half of 2023, as the macroeconomic situation improved, the company's traffic management in civil aviation achieved revenue of 232 million yuan/ +129.21%, accounting for 44.02% of total revenue; urban road traffic management achieved revenue of 151 million yuan/ +35.04%, accounting for 28.65% of total revenue. The sharp increase in civil aviation management revenue is due to the gradual recovery in the size of the civil aviation market in the first half of the year; during the reporting period, the company implemented a number of major air traffic control projects such as the Fuzhou automation project, and carried out a comprehensive pilot application of the business with Huai'an Airport as a benchmark, to create an overall smart airport solution for small and medium-sized airports. As we continue to deepen cooperation with the East China Air Traffic Control Administration and improve the southwest, northwest and overseas market layout, the company's market scale and influence will further expand.
Driven by technological innovation+capital operation, leading localized innovation. The company is seizing the opportunity of the Air Traffic Control Bureau's 8+N district management construction, promoting the iterative upgrading of the NUMEN-5000 prototype system, developing a new NUMEN air traffic control automation system innovation platform; promoting the development of core products such as large-scale airport IIS systems and intelligent allocation systems for airport operating resources based on the “Type 4 Airport”. At the same time, during the reporting period, the company's initial public offering raised 1,033 million yuan. The funds issued this time will be used for the construction of smart civil aviation, smart traffic control and other projects. In the long run, it is conducive to enterprise technology upgrading and product optimization, thereby enhancing the company's market position, improving the company's profitability, continuing to stabilize its leading position in the air traffic control field, accelerate the expansion of airport business, and seek new momentum for development.
Investment suggestions: Considering that Rice Information is the leader in civil command information systems of China Telecom Holdings, the business layout is in the three major fields of civil aviation, urban transportation, and urban governance, and the market share of civil aviation management systems is leading in the country. According to the company's performance forecast for the first half of the year 2023-2025, revenue was 20.11/25.40/3,047 billion yuan, net profit to the parent was 1.18/166/217 million yuan, corresponding EPS was 0.72/1.02/1.33 yuan, and corresponding PE was 49X/35X/27X. It was covered for the first time and given a “buy” rating.
Risk warning: performance forecasts and valuations fall short of expectations; product development falls short of expectations; competition intensifies