Key takeaway

The company released its 1H26 results. In 1H26, the company recorded operating revenue of RMB1.012bn, up 9.72% YoY; net profit attributable to the parent company was RMB94mn, up 32.38% YoY; net profit attributable to the parent company after deducting nonrecurring gains and losses was RMB89mn, up 44.04% YoY. In 2Q, revenue and net profit attributable to the parent company increased by 10.72% and 35.58% YoY, respectively, while the overall GPM rose by 6.67 pcts YoY. Revenue from the digital and intelligent finance and taxation business increased by 14.99% YoY, while AI products and services accounted for 33% of collections; the digital government business shifted from a scale-oriented approach to a strategy- and efficiency-oriented approach, with operating quality continuing to improve. The company maintained steady revenue growth. The rising contribution from AI commercialization, growth in its intelligent digital finance and taxation business, and quality and efficiency improvements in digital government services reinforced one another. Profit grew significantly faster than revenue, continuing to validate the rationale that AI drives upgrades in the product mix, service models, and operating efficiency. We maintain our “Buy” rating.

Event

On August 25, the company released its 1H26 earnings results. In 1H26, the company recorded operating revenue of RMB1.012bn, up 9.72% YoY; net profit attributable to the parent company was RMB94mn, up 32.38% YoY; net profit attributable to the parent company after deducting non-recurring gains and losses was RMB89mn, up 44.04% YoY.

Quick Take

The company's revenue grew steadily, while profit growth significantly outpaced revenue growth. AI - driven product mix upgrades and operational efficiency improvements began to yield results. In 1H26, the company’s revenue, net profit attributable to the parent company, and net profit attributable to the parent company excluding non-recurring gains and losses increased by 9.72%, 32.38%, and 44.04% YoY, respectively; in 2Q26, revenue reached RMB524mn, up 10.72% YoY, net profit attributable to the parent compa ny reached RMB63mn, up 35.58% YoY, and net profit attributable to the parent company excluding non-recurring gains and losses reached RMB61mn, up 49.79% YoY. Overall GPM was 62.23% in 1H26, up 3.17 pcts YoY; GPM was 63.97% in 2Q26 alone, up 6.67 pcts YoY. Operating costs increased by only 1.23% YoY in 1H, significantly below revenue growth, indicating a sustained improvement in profitability.

The digital and intelligent finance and taxation business maintained rapid growth, while AI is driving finance and taxation services to evolve from “tool-enabled efficiency gains” to “results delivery.” In 1H26, the digital and intelligent finance and taxation business generated revenue of RMB714mn, up 14.99% YoY; GPM reached RMB525mn, up 18.87% YoY, with the GPM rising 2.40 pcts YoY to 73.45%. At the end of the reporting period, contract liabilities for this business reached RMB759mn, up 21.43% YoY, supporting subsequent revenue recognition. Leveraging its “Xiyou” vertical large model, the company launched the Caiying Agentic Digital Intelligence Workshop. Through human-machine collaboration, it reshapes a three-tier value system encompassing finance and tax practices, tax compliance and optimization, and financial management, and is expected to further upgrade its product mix toward high-value services. The user and ecosystem foundations continued to strengthen, while AI monetization penetration has become an important leading indicator. As of the end of June 2026, the Yiqiying platform had 12.64 mn active enterprise users, up 7% from the beginning of the year; 8.55mn paying enterprise users, up 5% from the beginning of the year; and 57,000 ecosystem institutional partners, up 10% from the beginning of the year. In 1H26, collections from AI products and services on the Yiqiying platform accounted for 33% of collections from the digital and intelligent finance and taxation business. As AI-native products become integrated across the entire workflow of institutional operations, customer management, and outcome delivery, AI i s expected to evolve from an assistive tool into a key driver of revenue growth and business model transformation.

The digital government services business proactively adjusted its operating strategy, while an optimized revenue mix drove improved profitability. In 1H26, the digital government business generated revenue of RMB297mn, down 1.17% YoY; gross profit reached RMB108mn, up 2.70% YoY; and GPM reached 36.38%, up 1.37 pcts YoY. Leveraging AI, the company is shifting its business strategy from a “scale-oriented” approach to one focused on “strategy and efficiency,” prioritizing high-value projects and strengthening end-to-end project management. Despite a slight fluctuation in revenue, gross profit from operations continued to grow, reflecting improvements in the project mix and delivery efficiency.

Investment recommendation: The company maintained steady revenue growth. The rising contribution from AI commercialization, growth in the digital and intelligent finance and taxation business, and improved qua lity and efficiency in digital government services created synergies. Profit growth significantly outpaced revenue growth, continuing to validate the rationale that AI drives upgrades in the product mix, service models, and operating efficiency. Given the continued validation of the rationale behind the company’s AI-driven upgrades to its product mix, service model, and operating efficiency, the rapid growth of its digital and intelligent finance and taxation business, and its GPM of 73.45%, up 2.40 pcts YoY, we revise our earnings forecasts for the company. We previously forecast the company’s operating revenue at RMB2.447bn/RMB3.026bn/RMB3.764bn for 2026–2028, respectively, and net profit attributable to the parent company at RMB231mn/RMB332mn/RMB451mn, respectively. Following the revisions, we forecast the company's operating revenue at RMB2.447bn/RMB2.942bn/RMB3.404bn and net profit attributable to the parent company at RMB252mn/RMB370mn/RMB497mn for 2026–2028, respectively, implying valuations of 63.00x/42.91x/31.99x.

We maintain our “Buy” rating.

Risks

(1) Risk that changes in tax policies lead to product services falling short of expectations. Tax policies are characterized by a higher frequency of change and greater regional differences compared with accounting standards. Examples include tax rate adjustments in certain industries, additions or reductions of tax categories, and tax system reforms. If the company fails to update the design, functions, and service content of its digitalintelligent fiscal and tax service products in a timely manner, product services may fall short of expectations.

(2) Data leakage risk. The products developed by the company rely on network and internet technologies and therefore face potential risks such as hacker attacks, forced communication interruptions, and data leakage.

(3) Risk of contraction in government fiscal informatization spending. Affected by increasing economic downward pressure and tax and fee cuts, the national fiscal budget shows a tightening trend. Growth in the taxation industry has slowed in the past. There is a risk of contraction in fiscal informatization spending, which will have a certain impact on the company’s business development.