On July 26, the company released the 2024 semi-annual performance report. According to preliminary accounting, in the first half of 2024, the company achieved operating income of 2.958 billion yuan, a year-on-year decrease of 3.61%; net profit to mother 0.192 billion yuan, a year-on-year decrease of 22.70%; net profit after deducting non-attributable net profit of 0.174 billion yuan, a year-on-year decrease of 17.44%.

The digital cost business remains resilient, and product-side operating indicators continue to be optimized. 24H1's digital cost business achieved revenue of 2.459 billion yuan, an increase of 4.23% over the previous year. The overall growth rate was almost at the same level as Q1, and maintained strong operational resilience in the current context of macroeconomic pressure and continued downward pressure on real estate. Specifically, in terms of products, the renewal rate and application rate of cost products have increased compared to the same period last year, and customer stickiness continues to increase; the value of new digital cost products continues to be consolidated, and the application rate continues to increase; data service products such as index networks and contract clearance software have achieved rapid growth in current customer pain points and demand.

The construction business is still under pressure, but the revenue structure of the business continues to improve. 24H1's construction business achieved revenue of 0.288 billion yuan, a year-on-year decrease of 37.46%. The decline was larger than 24Q1. The construction business was affected by low economic conditions and declining real estate, and business operations were still under pressure. However, from a business perspective, the company actively optimizes product strategies and marketing practices, focuses on a number of core business application scenarios, provides project-level standardized products, increases the proportion of self-developed software and hardware, and increases resource investment in key regions, while strictly reducing costs and expenses. Through various measures, while the company's 24H1 construction business revenue declined, the share of products such as material management, labor management, and intelligent hardware increased, and the revenue structure improved.

Cost control has been strengthened, and the profit side has improved significantly. In the first half of the year, the company strictly controlled all expenses, and sales expenses and R&D expenses declined year-on-year. The 24Q1 company took the initiative to make adjustments to some of its business, and the related expenses were included in the current management expenses at one time, leading to a year-on-year increase in management expenses in the first half of the year. After entering 24Q2, the effects of business adjustments and cost control gradually became apparent. Net profit from single Q2 to mother increased by 44.66% year-on-year, and the profit side achieved significant improvements.

Investment advice: We forecast that the company's revenue for 2024-2026 will be 6.577/7.171/7.96 billion yuan, and net profit to mother will be 0.489/1.069/1.42 billion yuan, respectively, and the corresponding PE is 35/16/12 times, respectively. The company's revenue performance during the reporting period was pressured by the macro environment and the downturn in the real estate industry, but we are still optimistic about the company's competitive barriers and leading edge in technology products and customer markets. At the same time, the company adjusted its business strategy policy in a timely manner, improved revenue quality, and cost reduction results were initially evident. Therefore, we maintain a “buy” rating.

Risk warning: The boom in the construction industry has declined, the progress of informatization has fallen short of expectations; the pace of release of construction business demand has been delayed; technological breakthroughs in the digital design business have encountered bottlenecks, etc.