Key points of investment

In the first half of 2024, we achieved revenue of 0.781 billion yuan, a year-on-year increase of 6.53%, achieved net profit deducted from mother of 0.123 billion yuan, an increase of 6.58% year-on-year, and achieved growth in revenue and profit. Among them, Q2 revenue was 0.357 billion yuan, up 2.01% year on year, and net profit not attributable to mother was 0.053 billion yuan, down 11.14% year on year.

Increased investment in R&D and continuous refinement of AI products

R&D continued to be increased in the first half of 2024, with R&D investment reaching 0.178 billion yuan, an increase of 31.28% over the same period last year. AI product applications and solutions continued to be refined to provide customers with large model implementation scenarios and technology paths. The 24H1 sales/management/R&D expense ratio was 2.27%/3.56%/20.52% respectively. The R&D cost ratio increased 4.13pcts year-on-year, and high R&D investment had an impact on profits in the short term. The sales expense rate and management expense ratio were controlled, reducing 0.74 pcts and 0.53 pcts, respectively.

Continue to develop AI and achieve commercial use of digital employees

In the collaborative office business, we continue to intelligently upgrade the product line. Digital employee products have been successfully commercialized for customer projects in the first half of the year. In the email field, it supports customers to develop 139 email series intelligent and personalized AI functions.

In the smart channel business, we invest heavily in AI+ digital human technology and integrate innovative product research and development, including digital image customization platforms, AI online choreography, digital human live streaming platforms, and metaverse business offices to meet customers' multi-scenario business innovation needs.

In the cloud and big data business, we support customers to develop AI functions for C-end cloud products to implement more than 20 AI algorithms; in the field of computing power, we are working with ecosystem partners to jointly develop Rich AI Boost, a next-generation AI computing power cluster management platform.

Accelerate integration into the Hongmeng ecosystem and officially sign a contract with Huawei

Continue to increase technical investment in the Hongmeng ecosystem, and work with Huawei to jointly promote the prosperity and development of the Hongmeng ecosystem. Within the first half of the year, the company officially signed a contract with Huawei and reached a cooperation with Hongmeng. The company has built a complete Hongmeng App development integration framework, built a complete Hongmeng App client technology architecture system, and supported customers to develop a variety of Hongmeng mobile apps, including the Hongmeng version of the China Mobile App Application System. Email products can operate normally on the new version of the Hongmeng system to meet the email coverage in Xinhongmeng; in the field of computing power, they integrate the ecological capabilities of hardware manufacturers to jointly promote and sell Shengteng server products.

Profit forecasting and valuation

The company's 2024-2026 revenue is expected to be 1.717/2.063/2.493 billion yuan (1.848/2.287/2.828 billion yuan before adjustment, with an adjustment margin of -7%/-10%/-12%), and net profit to mother of 0.312/0.411/0.499 billion yuan (0.368/0.441/0.54 billion yuan before adjustment, with an adjustment margin of -15%/-7%/-8%), EPS 0.70/0.92/1.11 yuan/share (0.82/0.99/1.21 yuan/share before adjustment; -15%/-7%/-8% adjustment), maintaining the “buy” rating.

Risk warning

Market competition risks, AI product implementation falling short of expectations, rising labor costs, and risk of brain loss.