Key takeaway

The company released its 1H26 results. In 1H26, operating revenue reached RMB5.124bn, down 2.86% YoY; net profit attributable to shareholders of the parent company was RMB423mn, down 9.16% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB380mn, down 6.21% YoY. In 2Q26, revenue reached RMB2.912bn, down 6.81% YoY; net profit attributable to shareholders of the parent company was RMB197mn, down 12.57% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB173mn, down 11.36% YoY. The core fintech business remained stable, with traditional strengths and digital finance innovation advancing in tandem. Revenue from intelligent equipment declined, but overseas orders and intelligent product upgrades are expected to support a subsequent recovery. AI vertical models and agents are gradually entering industry-specific scenarios, while the cross-border payment license and digital renminbi business are expected to create incremental growth opportunities over the medium to long term. We maintain our “Buy” rating.

Event

On August 28, the company released its 1H26 results. In 1H26, operating revenue reached RMB5.124bn, down 2.86% YoY; net profit attributable to shareholders of the parent company was RMB423mn, down 9.16% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB380mn, down 6.21% YoY.

Quick Take

Earnings under slight pressure, with a significant marginal improvement in cash flow in 2Q26. In 1H26, the company recorded operating revenue of RMB5.124bn, down 2.86% YoY; net profit attributable to shareholders of the parent company of RMB423mn, down 9.16% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses of RMB380mn, down 6.21% YoY, while its overall gross margin was 28.88%, up 0.44 pct YoY. In 2Q26, operating revenue reached RMB2.912bn, down 6.81% YoY; net profit attributable to shareholders of the parent company was RMB197mn, down 12.57% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB173mn, down 11.36% YoY, while gross margin was 26.86%, up 0.10 pct YoY. Net cash flow from operating activities was negative RMB936mn in 1H26, while 2Q26 recorded a net inflow of RMB222mn, turning positive YoY and indicating a marginal improvement in operating cash flow.

The core fintech business remained stable, with traditional strengths and digital finance innovation advancing in tandem. In 1H26, the company’s fintech business generated revenue of RMB2.798bn, down 2.22% YoY and accounting for 54.60% of total revenue; gross margin was 32.66%, down 0.95 pct YoY. The company has ranked first in China’s smart financial equipment market by market share for 18 consecutive years. Its financial equipment technical services now cover more than 350,000 units. During the reporting period, it won bids for projects from national banks including ICBC, CCB, and PSBC. It also made breakthroughs in head-office-level projects, including smart displays for Bank of China and smart electronic locks and mobile banking outreach solutions for China Bohai Bank. In digital public finance, CTJ applies AI technology to core public finance scenarios such as financial and accounting supervision and performance management, based on its vertical large model for public finance. In commercial data services, China Daas Technology has achieved full coverage of the head offices of major national commercial banks. It has also launched AI agent products such as “Beneficial Owner Discrepancy Report” and “Intelligent Data Query.” The company has built deep expertise in bank customers, financial terminals, and operational services. It is expected to leverage its existing customer base to continue expanding its digital public finance, data services, and AI-powered financial applications.

Revenue from intelligent equipment declined, but overseas orders and intelligent product upgrades are expected to support a subsequent recovery. In 1H26, the company generated RMB2.254bn in revenue from smart equipment, down 11.61% YoY. Gross margin was 20.55%, down 1.58 pcts YoY. This was the main factor weighing on the company’s revenue. During the same period, revenue from software development and services reached RMB726mn, up 8.29% YoY. Revenue from operation and maintenance services and other businesses reached RMB2.144bn, up 4.36% YoY. Growth in software and service revenue partially offset the decline in equipment revenue. The company’s international business covers more than 130 countries and regions. The value of newly signed overseas contracts recorded double-digit growth in 1H26. The company achieved project breakthroughs in markets including Türkiye, Mexico, Asia-Pacific, and Eastern Europe. Digital solutions based on the aiCore platform have been commercially deployed in the Asia-Pacific market. International revenue declined 2.66% YoY in 1H26, but order performance was stronger than revenue performance. Combined with the securing of bulk orders for modular OEM products, this is expected to support subsequent smart equipment deliveries.

The company’s AI capabilities are expanding from underlying platforms to vertical models, AI agents, and smart terminals. Its extensive industry use cases reinforce its core strengths. Built around its proprietary Wangdao industry large model and aiCore knowledge platform, the company has developed Wangdao intelligent data, Wangdao intelligent review, and Wangdao intelligent writing solutions, as well as AI agent products for equipment operation and maintenance, government affairs Q&A, and immunization planning. Its AI Platform 3.0 has been upgraded into an enterprise-grade token operations platform. It has also enabled intelligent upgrades across more than ten subsidiaries. In financial services scenarios, the company completed the development of the G100 AI robot for bank branches and the G200 humanoid robot. The G100 has entered pilot programs at bank branches in Hebei, Gansu, and other regions; in public finance scenarios, its vertical large language model for public finance has been applied to accounting supervision and performance management; in commercial data scenarios, its “data + scenario + Agent” products have been deployed at several banks.

Coordinated presence in domestic payments, cross-border payments, and the digital renminbi, with cross-border payments and the digital renminbi serving as key growth drivers. In domestic payments, subsidiary China Payment & Clearing Network Co., Ltd. (CPCN) continues to strengthen its online corporate payment capabilities and payment and settlement capabilities across all e-commerce scenarios. It recorded revenue of RMB235mn and a net loss of RMB2mn in 1H26; during the reporting period, the company proactively phased out certain higher-risk merchants and standardized its business channels. These measures may cause short-term fluctuations in the company’s results but will help enhance the compliance and operating quality of its payment business. In addition, to meet the latest regulatory requirements, the company injected RMB100mn into CPCN. Its registered capital increased from RMB100mn to RMB200mn, with the company holding a 92.81% stake. This further strengthened the capital base of the payment business. In cross-border payments, GRG HT (HK) Co., Limited has obtained a Hong Kong Money Service Operator license and launched the “Guanghuitong GPX” global collection and remittance platform, covering B2B trade, cross-border e-commerce, trade in services, and other scenarios. In the digital renminbi business, the company won the bid for China Construction Bank’s hardware wallet self-service terminal project in Shenzhen and participated in the development of China Guangfa Bank’s Digital Renminbi 2.0 smart contract system.

Investment recommendation: The company’s results came under slight pressure in 1H26. Its core fintech business remained stable, while the order pipeline for overseas smart devices continued to improve. Vertical AI models and AI agents are gradually being deployed in industry scenarios. Cross-border payment licenses and the digital renminbi business are expected to unlock additional medium- to long-term growth opportunities. We forecast revenue of RMB12.934bn, RMB14.325bn, and RMB16.107bn for 2026–2028, respectively, and net profit attributable to shareholders of the parent company of RMB934mn, RMB1.067bn, and RMB1.216bn, respectively. The corresponding P/E ratios are 25.13x, 21.99x, and 19.29x. We maintain our “Buy” rating.

Risks

(1) Risk of macroeconomic fluctuations. The company’s products and solutions mainly serve financial institutions, government departments, and transportation industry customers. These customers’ IT investment, equipment replacement, and project acceptance schedules are correlated to some extent with macroeconomic conditions and fiscal expenditure. If customers tighten their budgets or project construction slows, the company may fall short of expectations in order acquisition, project delivery, and revenue recognition.

(2) Risk of intensified market competition. The fintech, smart equipment, digital government, and payment services markets have numerous participants. Cloud computing, internet, and artificial intelligence companies are also accelerating their entry into these fields. If the company cannot continue to maintain its product performance, understanding of application scenarios, and comprehensive delivery capabilities, it may face greater difficulty in securing orders, lower product prices, and pressure on gross margin.

(3) Risk of weaker-than-expected commercialization of AI products. The company continues to invest in the R&D of industry-specific large models, AI agents, and embodied intelligence products. Some AI robots and agents remain in the pilot promotion stage. If customer validation cycles are prolonged, willingness to pay is insufficient, or product replication is slower than expected, the related R&D investment may not be converted into revenue and profit at scale in a timely manner.

(4) Regulatory and operational risks in the payment business. Third-party payment and cross-border payment businesses are subject to strict regulation concerning licensing, anti-money laundering, merchant management, and fund security. Changes in industry regulatory policies, or weaker-than-expected progress in CPCN's merchant portfolio adjustment, application scenario expansion, and profitability improvement, may affect the scale and operating performance of the company's payment business.

(5) Overseas operations and exchange rate fluctuation risks. The company's international business is primarily settled in foreign currencies such as the US dollar, euro, and Hong Kong dollar. It may be affected by exchange rate movements, geopolitics, trade policies, and local market conditions. Significant exchange rate fluctuations, or longer delivery and customer payment collection cycles for overseas projects, may adversely affect the company's overseas revenue, gross margin, foreign exchange gains or losses, and cash flow.