Event: the company released its 23-year mid-year report, with an income of 455 million (- 33.8%) and a net profit of-278 million, compared with-113 million yuan in the same period last year, deducting non-net profit of-291 million and-133 million in the same period last year. Among them, Q2 realized income of 308 million (- 16.4%) in a single quarter, net profit of-111 million (- 101.4%) and deduction of non-net profit of-117 million (- 70.5%).

The macroeconomic impact has led to delays in the company's performance and damage to big data's income in electronic data forensics and public safety. As the company's business opportunity orders, in-hand order implementation, project delivery and acceptance have been delayed by the macroeconomic impact, the company's performance has been affected to a certain extent. In terms of products, the revenue from electronic data forensics in the first half of 2023 was 202 million yuan, down 28.0% from the same period last year, and the gross profit margin increased by 3.9pct over the same period last year. Big data's income for public safety was 184 million yuan, down 39.0% from the same period last year. Digital government and enterprise digital revenue totaled 47 million yuan, down 10.6 percent from the same period last year, and gross profit margin increased 7.6pct over the same period last year. The new cyberspace security revenue totaled 21 million yuan, down 58.7 percent from the same period last year.

The gross profit margin decreased and the rate of R & D expenditure increased. The company's consolidated gross profit margin in the first half of 2023 was 48.3% (- 4.1pct).

During the reporting period, the sales expense rate was 34.7%, an increase of 17.7pct over the same period last year. The rate of administrative expenses was 36.0%, an increase of 13.2pct over the same period last year. The R & D expenditure rate was 44.3%, an increase of 12.9pct over the same period last year, mainly because the company persisted in scientific and technological innovation and increased investment in big data's intelligence, new cyberspace security and new smart city.

Leading companies have released the first big model of public safety to help achieve effective early warning and governance in many areas. In June 2023, the company released the first public safety model in China, the Meiya Sky Rock Public Security Model, which has the capabilities of case intelligence analysis, police intention identification and logical reasoning of the case, and has been widely used in many fields. help various industries to achieve effective early warning and dissuasion. In terms of artificial intelligence security, the company participated in the formulation of the first generative artificial intelligence technology and product evaluation standards and large model credibility related standards in China, and released a series of artificial intelligence large model content testing products, which is expected to open up new growth space in the field of artificial intelligence security and public safety.

Taking into account the macroeconomic impact and the company's lower-than-expected performance in 2022 and the first half of 2023, we forecast that the company's net return profit for 2023-2025 will be 30,000,000 yuan (the original forecast for 23-24 year net profit will be 42.52 billion yuan), the corresponding EPS will be 0.35pm 0.45pm, the reference comparable company will give the company 45 times PE for 24 years, and the corresponding target price will be 20.25 yuan. Maintain the buy rating.

Risk hint

The competition in the network security market has intensified, and the progress of security innovation has fallen short of expectations.