This report is read as follows:

Market demand is expected to pick up, the rapid rise of innovative business, the company's 23H1 performance growth is obvious, speed up the expansion of the new track, the company is expected to maintain a high growth momentum.

Main points of investment:

Maintain the overweight rating. Taking into account the lower-than-expected recovery of demand in the downstream security field, we downgrade the company's EPS forecast for 2023-2024 to 0.40 yuan (- 0.19) / 0.57 (- 0.43) yuan, and add 2025 EPS forecast to 0.67 yuan. Considering the average valuation level of the industry and the rapid progress of the company's non-security business, we give the company 40x PE in 2024, raising the target price to 22.8 yuan (+ 2.27) yuan and increasing the holding rating.

The performance is basically in line with expectations, and the innovation business is growing rapidly. 23H1 achieved operating income of 802 million yuan, year-on-year + 11.97%, net profit of 39 million yuan, + 28.16%, + 6.95%, and net profit of 30 million yuan,-30.55%, respectively. The rise in profits in the first half of the year is mainly due to the new display and the strong development momentum of smart driving. In terms of business, the revenue of the company's 23H1 security business fluctuates narrowly, with a year-on-year fluctuation of-1.63%; the new display business revenue is + 45.00% year-on-year; and the intelligent driving business revenue is + 214% year-on-year. With the acceleration of innovation in the second half of the year, the company's performance is expected to continue to grow.

The new display business continues to develop, and the intelligent driving business is growing at a high speed. The company has a variety of core technologies such as pancake in the field of AR/VR. The revenue of AR/VR contract products is + 85% compared with the same period last year, and the sales volume exceeds 110000 units. The company will deepen the AR/VR layout in the investment project and is expected to maintain rapid growth in the future. In terms of automobiles, the company has an obvious competitive advantage and leading position in on-board lenses, millimeter wave radar and other products, and has been designated by many manufacturers. With the popularization of ADAS, vehicle networking and other applications, the company's market share will be further expanded.

Catalyst. AR/VR sales continue to increase; ADAS, vehicle networking applications are popular.

Risk hint. The recovery of security demand was not as expected; R & D failed to follow up in time.