[Report Guide]

1. Mobile smart terminal business to drive performance, smartphone differentiation seeking, application scenario expansion is expected to further drive demand.

2. One-stop vehicle vision software continues to iterate, the cabin soft and hard integration program has been overseas car factory global fixed-point project.

3. focus on the development of AIGC exclusive commercial shooting model, commercial shooting products are expected to become the next growth point.

event: the company released its semi-annual report in 2023, achieving revenue of 0.34 billion yuan during the reporting period, up 29.73 percent year-on-year, net profit of 50.0386 million yuan, down 10.30 percent from the same period last year, and net profit of 44.204 million yuan, up 147.65 percent from the same period last year. The net cash flow generated by the company's operating activities was 0.21 billion billion yuan, a year-on-year increase of 155.96, mainly due to the substantial increase in sales receipts during the reporting period.

mobile smart terminal business to drive performance, smartphone differentiation seeking, application scenario expansion is expected to further drive demand. The company released its semi-annual report in 2023. During the reporting period, it achieved revenue of 0.34 billion yuan, an increase of 29.73 percent over the same period last year; realized net profit attributable to its parent of 50.0386 million yuan, a decrease of 10.30 percent over the same period last year; and net profit deducted from non-parent of 44.204 million yuan, an increase of 147.65 percent over the same period last year. The company's research and development expenses were 0.164 billion yuan, up 33.95 year-on-year. The company increased recruitment for intelligent driving business and increased employee compensation and other related expenses. During the reporting period, the revenue of mobile smart terminal vision solutions reached 0.312 billion billion yuan, an increase of 36.09 percent over the same period last year, accounting for 91.67 percent of the company's operating income. Its growth drove the company's overall revenue and maintained a high gross profit margin. We believe that the extension of the replacement cycle caused by the global economic downturn and weak consumption has highlighted the competitive pressure in the smart phone market. In order to realize innovation and differentiation, the demand for technologies and products related to vision technology has surged. The "Smart Super Fusion Turbo Fusion" technology product developed by the company has landed, providing an innovative full-link super-domain solution for mobile phone shooting. XR headset developed by domestic and foreign technology giants will be combined with multiple application scenarios, in addition to expanding to the game field, the application scenario is expected to usher in more demand for industrial development.

one-stop vehicle vision software continues to iterate, the cabin soft and hard integration program has been overseas car factory global fixed-point project. Hong soft VisDrive®It is a one-stop vehicle vision software solution for automotive OEM customers. In terms of in-cabin products, the company has deeply cultivated DMS and OMS product forms and accumulated a series of visual perception algorithms. The Tahoe front-loading hardware and software integrated vehicle vision solution recently launched has obtained the global designated project of overseas car factories. At present, the Westlake solution under research has completed the platform deployment of ACC, LCC and AEB software functions and entered the stage of real vehicle function testing. In terms of extravehicular products, the company focuses on driving assistance function, automatic parking function (APA), visual perception algorithm, ultrasonic visual fusion algorithm and regulation algorithm providing 360 ° surround vision subsystem, including front vision, circumferential vision, surround vision, rear vision, night vision camera, transparent chassis and other functions. AVM products have been designated for dozens of models, and ADAS and ADAS-BSD products are still in the fixed-point development stage of customers.

focus on AIGC exclusive commercial shooting model development, commercial shooting products are expected to become the next growth point. In order to solve the problems of high cost, limited effect, time-consuming process and feedback delay, the company developed Hongsoft's AIGC exclusive commercial shooting model. Based on this model, all kinds of clothing and commodity display maps can be generated in a controlled manner, and the error of generating maps can be greatly reduced, and the quality of commercial maps can be improved and the new content style of commercial maps can be enriched. The development process mainly uses the company's technical advantages in human body and object-related edge detection, human body geometry, depth recovery and intelligent segmentation to complete large model construction and small model development. This AIGC smart commercial auction model is expected to be officially launched to the market in the second half of 2023. With the rapid development of e-commerce, the market space brought by the increase in commodity sales will further boost the demand for commercial products and become a new growth point for the company.

Investment advice

We expect the company's 2023-2025 net profit of 0.151 billion yuan, 0.194 billion yuan, 0.279 billion yuan, EPS of 0.37, 0.48, 0.69, corresponding to the price-earnings ratio of 99, 77, 54 times. We are optimistic about the company's future development and maintain a "recommended" rating.

Earnings Forecasts and Financial Indicators

Risk Alert

Risk of mismatch between R & D results and market demand; risk of lower than expected downstream demand boom; risk of increased competition in the industry.

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this article is taken from: the research report released by china galaxy securities on August 19, 2023 "[galaxy computer] company review_hongsoft technology (688088)_mobile smart terminal business to boost performance, deducting non-net profit to exceed expectations"

Analyst: Wu Yanjing

Rating system:

Recommended: Expected to exceed the average return of the benchmark index by 20% or more.

Cautious recommendation: Expected to outperform the average return of the benchmark index.

Neutral: Expected to be comparable to the average return of the benchmark index.

Avoidance: Expected to be below the benchmark index.

Recommended: Expected to exceed the average return of the benchmark index by 20% or more.

Cautious recommendation: Expected to outperform the average return of the benchmark index.

Neutral: Expected to be comparable to the average return of the benchmark index.

Avoidance: Expected to be below the benchmark index.