Incident: Dingjie Software released its 2024 semi-annual performance report. During the reporting period, the company achieved main revenue of 1.004 billion yuan, an increase of 10.98% over the previous year, and realized a net profit of 0.042 billion yuan to the parent company, an increase of 17.48% over the previous year, after deducting 0.04 billion yuan of non-return net profit, an increase of 54.03% over the previous year.

Respond to the digital needs of Chinese enterprises to go overseas and continue to expand overseas markets. During the reporting period, the company achieved revenue of 0.455 billion yuan and 0.549 billion yuan in mainland China, respectively, up 7.37% and 14.16% from the same period last year. An important factor driving business growth in non-mainland regions is the company's continuous expansion in overseas markets. What is behind this is that the company follows the trend of Chinese enterprises going overseas and is committed to providing local operation support for Chinese enterprises. Currently, the digital demand for Chinese enterprises to go overseas accounts for more than 50% of Dingjie's overseas market demand.

Expense control has shown results, and the profit growth rate has exceeded the revenue growth rate. 24H1's gross margin was 57.44%, down 3.72 pcts year over year. On the cost side, the company's sales, management and R&D rates in the first half of the year decreased by 0.1 pct, 2.6 pct, and 3.3 pct, respectively, compared to the same period last year. Expense control is also an important factor for the company to achieve more significant growth on the profit side, especially when deducting non-profit compared to the revenue side.

AI intelligence-driven applications are constantly being enriched. During the reporting period, the company continued to expand AI applications for digital scenarios and general-purpose AI applications using Athena as a base. Among them, industry AI applications, such as equipment manufacturing clouds and component clouds, saw revenue growth of 114% over the same period last year. In the field of general AI applications, following ChatFile, the company launched a new AI digital intelligence assistant for executives. We believe that with the gradual expansion and commercialization of AI SaaS applications, Dingjie will further advance towards a platform-based company and is expected to fully benefit in terms of business model and performance in the future.

Investment advice: We expect Dingjie Software's 2024-2026 revenue to be 2.531 billion yuan, 2.888 billion yuan, and 3.26 billion yuan, respectively, and net profit to the parent company of 0.186 billion yuan, 0.229 billion yuan, and 0.271 billion yuan, respectively.

We continue to be optimistic about Dingjie's business development resilience and the development opportunities and potential brought to the company by AI, and maintain the company's “buy” rating.

Risk warning: risk of macroeconomic fluctuations; risk of market competition; risk of business development falling short of expectations; risk of technological innovation.