Incident: The company announced that 1H23 achieved total operating income of 1,243 million yuan, a year-on-year increase of 32%, net profit of 207 million yuan, a year-on-year increase of 121%, a gross profit margin of 72%, and a net profit margin of 17%. Among them, the MaaS business revenue was 431 million yuan, an increase of 24% over the previous year, the BaaS financial industry's cloud revenue was 492 million yuan, an increase of 55% over the previous year, and the BaaS insurance industry's cloud revenue was 320 million yuan, an increase of 14% over the previous year.

The number of core customers in the MaaS business and the average revenue of core customers continue to increase, and profitability is growing steadily. 1H23's MaaS business (model as a service, that is, the “data analysis” business within the “intelligent analysis and operation service” business under the original business category) revenue was 431 million yuan, an increase of 24% over the previous year. Among them, the number of core business customers reached 146, an increase of 14 over the end of the first half of the year. The average revenue of core customers increased 11% year-on-year, and the core customer retention rate increased to 98%. (1) Industry-wide application scenarios may drive continued growth in the number of core customers. MaaS application scenarios include all industries such as credit, insurance, and wealth management. As the share of financial assets in China's residents' wealth management increases, and the company continues to explore fields such as inclusive finance and green finance, the depth and breadth of MaaS application scenarios will continue to increase, and the number of core customers is expected to continue to grow. (2) Core technical barriers and service convenience are expected to further increase the core customer retention rate and average income of core customers. The MaaS business digitizes KYC and KYP processes of commercial institutions through decision-making AI, and has a high technical threshold. The company's self-built MaaS cloud platform has a high stability of 99.998%, can serve more than 100 million daily query requests, and customers can freely deploy various models according to business needs.

Generative AI empowers cloud business in the BaaS financial industry, driving a year-on-year increase in the scale of asset transactions. The 1H23BaaS financial cloud business (Business as a service, including intelligent operation and marketing business under the original business category) achieved revenue of 492 million yuan, an increase of 55% over the previous year. This was mainly due to the increase in the scale of asset transactions. The 1H23 asset transaction scale increased 72% year-on-year to 21.26 billion yuan. On the one hand, while economic recovery provided liquidity in the first half of the year, the company's technical service fee rate decreased by 0.25% to 2.31% year-on-year; on the other hand, the company used AIGC to efficiently reach and operate users, compounded by MaaS to accumulate advantages, and asset transaction efficiency continued to improve.

Technology platforms empower insurance brokers, and the BaaS insurance industry's cloud business premium revenue continues to rise. The BaaS insurance cloud business (Business as a service, including insurance marketing services under the original business category) achieved revenue of 320 million yuan, an increase of 14% over the previous year, and renewal premium turnover of 658 million yuan, an increase of 40% over the previous year. The company empowers insurance brokers through the Sun and Moon Insurance App, increases the per capita production capacity of insurance brokers, recommends insurance products through generative AI, and uses a team of offline insurance brokers to accumulate users of high-value insurance policies. As the impact of the epidemic comes to an end and people's willingness to spend recovers, the gradual recovery of the insurance industry is expected to drive further growth in the BaaS insurance cloud business.

Overall, the company's MaaS business and BaaS business have both achieved rapid double-digit growth. It has high technical barriers and a strong customer base in AI+ financial business model exploration. The gross margin level and net profit margin have remained at a high level, and the leading effect in the industry is beginning to show. We expect the 2023-2025 EPS to be 0.65/0.80/1.05 respectively. Based on the closing price on August 24, 2023, we expect the corresponding 2023PE to be 14.38 times higher, giving it a “buy” rating.

Risk warning: Competition in the industry is intensifying, the macroeconomic economy is declining beyond expectations, and fintech regulations are becoming stricter.