The company's 24H1 revenue and net profit after deducting non-net profit increased steadily, and net profit to mother fluctuated greatly due to changes in fair value and a decrease in earnings. The company's core business line is operating steadily, and the entire business line continues to actively embrace AI and metaverse innovation to drive growth; it has reached a Hongmeng cooperation with Huawei to support customers in developing various Hongmeng mobile apps and further broaden the company's business capabilities.

Incident: Caixun Co., Ltd. published its 2024 interim report. 2024H1 achieved operating income of 0.781 billion yuan, YoY +6.53%; realized net profit of 0.118 billion yuan, YoY -52.92%, mainly affected by the reduction in fair value change income of the Henan Lantian Xinchuang Industrial Investment Fund held by the company; deducted non-net profit of 0.123 billion yuan, YoY +6.58%. Net operating cash flow was $33.654 million compared to -8.898 million yuan for the same period last year. In the second quarter of 2024, the company achieved operating income of 0.357 billion yuan, YoY +2.01%; net profit to mother recorded 34.2388 million yuan, YoY -81.98%; net profit after deduction was 52.6314 million yuan, YoY -11.14%.

The core business is growing steadily, and new business engines are being actively expanded. The company's collaborative office/smart channel/cloud and big data business 24H1 achieved revenue of 0.245/0.308/0.189 billion yuan, YoY +13.22%/+1.46%/+11.57%, respectively. Revenue growth in the smart channel business slowed in the first half of the year, but the core stock business continued to increase, and customer stickiness was strong; in the first half of the year, in addition to continuing to invest in AI+ digital human innovative product development, the company also officially signed a Hongmeng cooperation agreement with Huawei and supported customers to develop various Hongmeng mobile apps to further broaden the company's business capabilities. The collaborative office business line is growing steadily. The company continues to expand large-scale central state-owned enterprises in the communications, finance, energy and transportation industries by seizing the deepening trend of industry innovation and the product advantages of AI intelligence integration. While continuing to serve core customers such as mobile, the cloud and big data product lines further provide services such as AI function development support for cloud products. At the same time, they are also jointly developing Rich AIBoost, a next-generation AI computing power cluster management platform, to jointly promote and sell Shengteng server products and create intelligent computing center service capabilities integrating software and hardware.

Net profit attributable to mother was affected by changes in fair value, and withholding non-net profit showed a steady increase in resilience. In the first half of 2024, the company's net profit fell by 52.92%, mainly due to a decrease in fair value change income from the Henan Lantian Xinchuang Industrial Investment Fund held by the company, but net profit after deducting non-net profit still achieved a 6.58% year-on-year increase, reflecting the stable profitability of the main business. The company continues to increase investment in R&D, making forward-looking arrangements for technology development trends in AI and other industries. R&D expenses increased by 31.28% year on year, showing a positive outlook for the company's long-term development. The company's sales expenses rate and management expense ratio fell to 2.27% and 3.56% respectively in the first half of the year, down 0.74 and 0.53 percentage points from the previous year, reflecting the company's active control of cost-side expenses and improving operational efficiency.

The three major business lines continue to embrace AI industry trends, and many products have already been launched. In collaboration with the office product line, the company has combined AI to create smart email and digital employee products. Digital employee products have been successfully commercialized and used in customer projects to provide customers with digital employee products and solutions for various scenarios such as enterprise micro shopping guides, real estate intelligent consultants, and office assistants. The smart channel product line also invests in AI+ digital human technology integration to develop innovative products, including digital image customization platforms, AI online choreography, digital human live streaming platforms, and metaverse business offices. In the state-owned cloud business, the company supports customers to develop AI functions for C-terminal cloud products, implementing more than 20 AI algorithms including portrait animation, document classification, image segmentation, literary images, image editing, etc.; creating a cloud disk intelligent assistant integrating conversation assistants, application assistants, search assistants, document assistants, content assistants, and writing assistants. AI capabilities continue to be embedded in the company's three product lines, explore new needs under the wave of AI technology with customers, and open up the company's business and product space.

Maintain a “Highly Recommended” investment rating. The company's core business operates steadily, actively embraces new business opportunities such as AI and Hongmeng, and continues to advance the implementation of related products. We expect the company's net profit to be 0.249/0.302/0.362 billion in 2024-2026, corresponding to 28/23/19 times PE in 2024-2026. Maintain a “Highly Recommended” investment rating.

Risk warning: Industry competition intensifies, expansion in new fields falls short of expectations, development of new technologies and products falls short of expectations, and policy implementation falls short of expectations.