I. Analysis and judgment

Recently, we have conducted a survey of the company and discussed the operation with the management.

II. Analysis and judgment

Ecological cooperation is conducive to long-term development, smart car business has broad prospects, interactive business 2021H1 has maintained rapid development, with a growth rate of nearly 30%. The company's pen interactive business 2021H1 achieved revenue of 512 million yuan, a growth rate of 27%. Among them, the revenue of Han Wang Pengtai, a subsidiary mainly responsible for pen interactive painting, grew by 28% and net profit by 35%. At the same time, the overall gross profit margin of pen interactive business increased by 3.31 percentage points compared with the same period last year.

With the development of products, strategy and sales, the pen interactive painting business is expected to continue to grow. 1) in terms of products, the first professional digital drawing board product of the company's digital painting brand "xencelabs" was released in February 2021, while other types of products under the series of brands are also under continuous research and development, and the product line is constantly enriched. 2) in terms of strategy, the company launched professional painting brand "xencelabs" around the world to seize the professional market; on the other hand, it introduced XP-PEN brand products into China to seize the domestic consumer market; on the other hand, it pushed the UGEE brand overseas and integrated the overseas low-end market. 3) in terms of sales, it currently sells to hundreds of overseas countries and regions through mainstream cross-border e-commerce platforms such as Amazon and eBay and nearly 20 independent self-supporting stations, while increasing sales efforts in the domestic market and strengthening promotion in Taobao, JD.com, Douyin, Kuaishou Technology and other platforms.

The potential of other interactive businesses is promising. 1) the field of consumer electronic pens: on the one hand, it maintains cooperation with the original strategic key customers, on the other hand, it actively develops other major customers and makes progress, and the demonstration effect is prominent. At the same time, the company extends to the consumer market, and the IOS-compatible capacitor pen products enter the trial production stage, and will be sold directly to consumers when the conditions are ripe. 2) paperless office field: maintain the industry advantages in banking, operators, power and other fields, while extending to the public security, judicial and other markets.

With regard to the continued development of other businesses, the long-term potential of AI products and big data's business, the company has set up cases such as the three-tier court in Beijing to promote the simultaneous generation of electronic files, laying the foundation for national promotion in the future.

AI terminal business, intelligent office book, bionic flapping wing aircraft, translation pen and other products continue to iteratively upgrade, the new intelligent office products launched in the first half of the year in JD.com, Tmall and other platforms of sales data gradually volume, and into the JD.com gold list; bionic flapping wing aircraft expanded from a single bionic bird to bionic butterfly, lark, Bifang divine bird, white-headed eagle and other forms.

In the first half of the year, the company's text big data and AI terminal business grew by 55% and 68% respectively, of which the text big data business 19H1-21H1 compound growth rate reached 22%.

III. Investment suggestions

The company's painting business continues to grow to verify its own strength, while consumer electronic pens and other businesses have long-term potential. It is estimated that the EPS of the company from 2021 to 2023 is 0.61, 0.78 and 0.95 respectively, and the corresponding PE is 28X, 22x and 18x, respectively. Select the Wind artificial intelligence section, the related companies' average PE in 2021 is 28X (Wind consensus expectations), the company's current valuation is slightly lower than the industry average, considering that the company's performance is expected to continue to grow high, and is a leader in the field of artificial intelligence vision, maintain the "recommended" rating.

Fourth, risk tips:

Overseas business is not as expected, and the expansion of the traditional field of artificial intelligence is not as expected.