The results of the mid-2023 report maintained rapid growth. In the first half of 2023, the company achieved operating income of 127 million yuan, an increase of 64% over the same period last year, and a net profit of 23 million yuan. In terms of revenue composition, (1) Software development and licensing earned 32.42 million yuan, an increase of 16% over the same period last year, with a gross profit margin of 95.50%, of which software tool licensing business accounted for 68.94%, an increase of 57.77% over the same period last year, maintaining a rapid growth; software technology development business affected by changes in the external trade environment, the recent customer demand for advanced process platform development has slowed down, resulting in a slight decrease in this kind of business compared with the same period last year. (2) the revenue of the testing machine and accessories business was 94.78 million yuan, an increase of 91% over the same period last year, and the gross profit margin was 50.95%.

Buy 43% stake in Shanghai Yiruixin Electronics to improve the layout of DFT business. The company intends to invest in Shanghai Yiruixin Electronic Technology Co., Ltd. in the form of equity transfer, with its own capital of 34.78 million yuan, the 43% equity held by Meng Fanjin, the controller of Ericsson. After the completion of this investment, the company controls a total of 62% of Yiruixin's equity by direct and indirect means, and Yiruixin will become a controlling subsidiary of the company and be included in the consolidated statement of the company. Ericsson specializes in integrated circuit testability design (DFT) technical services and product development, and its solutions can complement each other with the company's yield improvement system, open up the data link, improve the company's overall yield improvement solution, and provide a more complete solution for design companies and wafer factories. Through this investment, the company will be able to integrate DFT technology into the existing product and technology ecology, and deeply link the design end with the manufacturing end. From January to August 2023, billion Ruixin made an operating income of 4.21 million yuan and a net profit of 980000 yuan excluding equity payments. We believe that this acquisition is an important part of the company's DFT business layout and is expected to create synergies at the customer and technical levels.

The company launched the 2023 equity incentive plan to demonstrate high growth confidence. The company disclosed the 2023 equity incentive plan (draft), encouraging a total of 87 people for deputy general managers, middle managers and core technical backbones. The personnel scale of the company has continued to expand in the past three years, and the number of R & D personnel at the end of 2020-2022 was 87,139 and 248respectively. by the end of June 2023, the company had 402 employees and 327 R & D personnel. This equity incentive involves 21% of the company's employees, with a wide range of incentives. The performance review period is 23-25 years. Based on the company's 2022 income, the growth rate of the assessment income is 60%, 150% and 300% respectively, and the growth rate of the basic value is 30%, 75% and 160% respectively. We believe that talents in the EDA industry are the core, and the company's incentive plan is expected to achieve good results.

The product line is constantly enriched to explore a new software-driven growth curve. The main contents are as follows: (1) an efficient process monitoring (Process Control Monitor, PCM) scheme has been launched to open up the integration platform of design, testing and analysis tools. at present, the scheme has been verified and optimized in many production lines, and some of the production lines have been put into application delivery.

(2) extended layout manufacturability (Design for Manufacture, DFM) series EDA software, independently developed CMP EXPLORER, a modeling tool for chemical mechanical polishing process. According to the film thickness and surface morphology data of each test structure after CMP process and CMP process parameters, the software established CMP model. At present, the software has been used in several domestic head wafer factories. (3) continuous extended layout semiconductor data analysis and management system (DATAEXP series products).

Profit forecast and investment advice. We believe that the company continues to enrich its product line around the improvement of yield, making continuous efforts in DFT, PCM, data management and other subdivided tracks, constantly improving and landing its products, and looking for a new growth curve for the medium-and long-term development of software-driven business. The company makes concerted efforts in the three major business areas of EDA software, electrical testing equipment and data analysis software, with strong product strength, rapid growth in performance and strong profitability. We predict that the operating income of the company from 2023 to 2025 will be 580,000,000,000 yuan, respectively, and the net profit of returning to the mother will be 1.64 hundred and twenty-five hundred million yuan, respectively, and the corresponding EPS will be 1.884yuan, respectively. Reference to comparable companies, combined with the current industry stage and company growth and barriers, give 2023 dynamic PS35-40 times, 6-month reasonable value range of 101.48-115.98 yuan, given a "better than the market" rating.

Risk Tip: the company's business promotion is not as expected, industry policy risk.