The company announced 1H23 results in line with our expectations
1H23 revenue was 92 million yuan, up 43.1% year on year; adjusted net loss was 39 million yuan, down 33.4% year on year. The adjusted net loss ratio was 4.2%, an increase of 5.4ppt year on year.
Development trends
Revenue is growing steadily, and AI+ manufacturing brings strong driving force. Within 1H23:1) Manufacturing revenue increased sharply by 81.3% year-on-year to 6.1 billion yuan. Benefiting from the high prosperity of the domestic intelligent manufacturing core track, the company's revenue growth was strong in various manufacturing segments. The revenue of the automotive equipment/OLED panel semiconductor manufacturing/engineering and construction sector was 227/0.98 billion yuan, respectively, +87.2%/+91.5%/+86.0%. In 2022, the food and beverage & new materials sector was added. 1H23 revenue was 59 million yuan, with benchmark cases such as the intelligent transformation of leading breweries; 2) The financial services industry maintained steady growth, with revenue of 232 million yuan, +5.6% year-on-year.
The accumulation of technical assets has led to an increase in delivery efficiency, and the company's gross margin continues to be optimized. 1H23's gross margin was 32.4%, +0.5ppt; gross profit was 299 million yuan, +45.3% year-on-year, mainly due to economies of scale and increased standardization of products and solutions. 1H23's adjusted sales/management/R&D expense ratio was 5.1%/9.9%/22.9%, respectively, compared to -1.0/-0.8/-5.5ppt, with significant cost reduction and efficiency gains.
The AI+ manufacturing industry combines technology and scenarios, and AIGC is being implemented at a fast pace. During the reporting period, the company actively laid out the AI2.0 era. The MatrixVision edge video intelligence platform and MMOC artificial intelligence technology platform reached a new level of 3.0, and launched the industrial model “Qizhi Kong Ming AinOGC”, which has 15B parameters, provides services such as model refinement to the industry, and provides customers with more complete AI capabilities from perception to decision making to generation. We believe that the company is expected to rely on advanced technical capabilities, high-quality customer card slots, and knowledge accumulation in vertical scenarios to achieve rapid implementation of AI technology in manufacturing scenarios.
Profit forecasting and valuation
Considering that the implementation of the company's financial business is slowing down and increasing research and development in the processing industry, we lowered the 2024e adjusted net profit forecast by 98.4% to 115 million yuan, keeping the 2023e profit forecast basically unchanged.
We maintain the company's outperforming industry rating, and the target price is HK$21, corresponding to 4.5x/2.9x2023e/2024e P/S. There is an upward space of 0.72% compared to the current stock price. Currently, the stock price is trading at 4.3x/2.7x 2023e/2024e P/S.
risks
Competition in the industry is intensifying; business continues to lose money; important customers are being lost; technology iteration is faster than the company's ability to innovate.