The company publishes its 2023 semi-annual report. 1H23 realized income of 305 million yuan, an increase of 23.62% over the same period last year; net profit of 88.2399 million yuan, an increase of 26.10% over the same period last year; net profit of 85.7293 million yuan, an increase of 23.88% over the same period last year; diluted EPS0.22 yuan, weighted average return on net assets of 8.21%, operating cash flow of 0.23 yuan per share. The company's 2Q23 income was 237 million yuan, an increase of 52.98% over the same period last year, and its net profit was 84.7561 million yuan, an increase of 54.52% over the same period last year.

Brief comments and investment suggestions.

1. Financial data analysis: 2Q23 income 237 million yuan, year-on-year + 52.98%1H23 revenue 305 million, an increase of 23.62% over the same period last year. ① business structure: educational examination standardized test products and overall solution income 231 million compared with the same period last year + 28.37%, accounting for 75.63%; intellectual education test standardized test products and overall solution revenue 50 million compared with the same period last year, accounting for 16.28%. Labeling products drive growth. ② regional structure: the income in Northeast China is 21 million-0.95%, accounting for 6.86%; the income in North China is 32 million, + 12.08%, accounting for 10.43%; the income in East China, 50 million, is + 1.17%, accounting for 16.33%; the income in South China is 22 million,-44.16%, accounting for 7.11%; and that in Central China, 49 million is + 4.39%, accounting for 16.08%. The income of the northwest region is 34 million year-on-year + 215.60%, accounting for 11.14%, while that of the southwest region is 98 million, accounting for 32.05% compared with the same period last year. ③ 2Q23: revenue of 237 million yuan, + 52.98% year-on-year.

2Q23 gross margin 53.74% year-on-year-4.80pct. ① 1H23: gross profit margin 53.08%, down 3.27pct from the same period last year.

② product structure: the gross profit margin of 1H23 educational examination standardized test products and overall solutions is 57.30%, down 2.40% from the same period last year; the gross profit margin of educational examination standardized test products and overall solutions is 42.82%, down 0.21pct from the same period last year. ③ regional structure: 1H23 gross profit margin in Northeast China is 42.28%, down 8.92pct from the same period last year; in North China, 60.21%, down 3.12pct; in East China, 50.65%, down 4.22pct; in South China, 49.84%, down 0.65pct; in Central China, 60.48%, down 7.28pct; and in Northwest China, 54.92%, increasing 1.79pct. The gross profit margin of the southwest region was 50.68%, an increase of 0.51pct over the same period last year. ④ 2Q23: gross profit margin 53.74%, down 4.80pct from the same period last year.

The expense rate during 2Q23 is less 3.7pct than the same period last year. ① 1H23: the period expense rate is 22.47%, which is 1.27pct lower than 1H22; the sales expense rate is 10.70%, which is 0.55pct lower than 1H22; the management expense rate is 7.47%, which is 0.16pct higher than 1H22; the financial expense rate is-2.79%, which is 0.17pct higher than 1H22; and the R & D expense rate is 7.08%, which is 1.04pct lower than 1H22. ② 2Q23: the expense rate during the period is 15.07%, which is lower than that of 2Q22 by 3.66pct. The sales expense rate is 7.21%, which is 1.26pct lower than 2Q22; the management expense rate is 4.90%, which is 1.04pct lower than 2Q22; the financial expense rate is-1.59%, which is 0.75pct higher than 2Q22; and the R & D expense rate is 4.55%, which is 2.11pct lower than 2Q22. We judge that the optimization of expense rate is mainly due to the rapid growth of the company's revenue.

The net profit of 2Q23 was 84.7561 million yuan, an increase of 54.52% over 2Q22.

two。 Favorable policies lead the spatial expansion of the industry, the integration of scientific and technological products helps the extension of sales channels, the policy leads the development, and science and technology helps the transformation. ① policy: in October 2022, the digitization of education was included in the report of the Party Congress for the first time, defining the action program for the future development of the digitization of education. The digitization of education will play a key role in innovating the teaching mode of education, the supply mode of educational services and the mode of educational governance, and the education industry will usher in a deep opportunity of digital transformation. ② science and technology: the deep integration of new technology and education will promote the in-depth development of educational digitization, so that new hardware upgrades, software applications and services covering the whole teaching activities, and payment scenarios for C-end users will continue to increase, and the whole industry will usher in new opportunities for rapid growth.

Products and channels are optimized to meet multiple needs. ① model: the company has changed from a single product sales and overall solution model to a multi-mode of product sales, solutions, operational services and leasing services. ② customer group: from G-end customers, B-end customers to C-end customers for pilot extension. ③ channel: there are nearly 3000 partners in the country, and the sales channel network sinks to every district and county. ④ platform: a large number of examination business data platforms and some regional wisdom education platforms have been built, which can provide entrance advantages for B-side and C-side customer expansion.

Wisdom examination and wisdom education go hand in hand, and AI+ products are upgraded smoothly. ① market expansion: 1H23's intelligent security doors, cheating prevention and control products have been sold in 29 provinces, municipalities and autonomous regions, and the company's intelligent security door products have been launched in 21 provinces across the country. The company has won the bid for the construction of five regional wisdom education-related platforms, including Shuangliu District of Chengdu and Jianyang City, basic education products have been sold in 9 provinces, and higher vocational colleges and universities have landed in nearly 20 higher vocational colleges across the country. ② English listening and speaking: based on the large voice model AI base, the company upgrades the company's English listening and speaking products, and plans to promote it to the market in 2H23. ③ intelligent sports: by the end of 1H23, the company's intelligent sports solution has covered more than 10 provinces and nearly 200 schools; AI new sports test one-stop solution & service has been applied in multi-regional sports entrance examination, accumulating 2 million + high school entrance examination data, which has been highly recognized by the leaders of the relevant Bureau of Education.

Maintain judgment of the company. We believe that the company's bid examination business and wisdom education business are expected to usher in explosive growth, and AI applications are expected to further enhance product competitiveness and expand business application scenarios. The company insists on being market-oriented, constantly upgrading and launching new products, based on its own core products and landing service capabilities, deeply integrates advanced technology with business, and always keeps the company's core products at the leading level in the industry. it is expected to achieve sustained growth.

Earnings forecasts and valuations. We estimate that the total revenue of the company in 23-25 is 6.9,9.5 and 1.32 billion yuan respectively, which is + 66.7%, + 38.5% and + 38.6% respectively, and the profits are 1.7,2.4 and 320 million yuan respectively, and the year-on-year profits are + 148.7%, + 38.4% and + 34.2% respectively. According to the comparable company, considering that the company's core products have always been at the industry leading level and are expected to usher in explosive growth after the epidemic, the company will be given 45-50 times PE in 2023, with a reasonable value range of 19.32-21.46 yuan per share, maintaining a "better than the market" rating.

Risk hint. Policy extension risk, high degree of industry dependence risk, technology research and development risk.