Event: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 0.781 billion yuan, a year-on-year increase of 6.53%; net profit to mother of 0.118 billion yuan, a year-on-year decrease of 52.92%; after deducting non-net profit of 0.123 billion yuan, a year-on-year increase of 6.58%.

Net profit attributable to mother was affected by changes in fair value and maintained growth after deducting non-net profit. In the first half of 2024, due to a decrease in the fair value of the Henan Lantian Xinchuang Industrial Investment Fund held by the company, the company's net profit to mother was 0.118 billion yuan, down 52.92% year on year, after deducting 0.123 billion yuan of non-net profit, up 6.58% year on year. Net profit to mother was drastically reduced by changes in fair value of the investment fund, and remained resilient after deducting non-net profit.

Continue to increase investment in R&D, enhance the core competitiveness and user experience of products, and help enterprises quickly build applications. The company continued to invest in R&D in the first half of 2024, and R&D investment increased by 31.28% over the same period last year.

The company has always attached great importance to technology research and development and innovation capabilities. Relying on the accumulation of artificial intelligence and metaverse core technology, the RiChAI gigafactory is based on the three layers of computing power infrastructure management layer, application development tool platform layer, and industry application solutions to quickly build an efficient intelligent computing cluster for users, create a one-stop, low-threshold development environment, help enterprises quickly create scenario-based AI applications+metaverse solutions according to user needs, and accelerate the digital transformation and intelligent upgrading of the industry.

The three core product lines have been intelligently upgraded, and the basic business growth has been steady and increasing. The company focuses on the three core product lines of enterprise digital big data: 1) Collaborative office product line: with RichMail email as the core, concentrating, and adhering to the industry's unique dual-platform strategy, forming organizations with collaborative office, smart channels, and canal customers as telecom operators, large enterprises, governments, universities, etc., to provide them with mobile and PC smart office collaborative management software and services such as packaged emails, instant messaging tools, digital offices and internal information collaboration platforms. The collaborative office product line earned 0.245 billion yuan during the reporting period. This is an increase of 13.22%. 2) Smart channel product line: Service enterprise data operation and management, provide customers with effect-oriented platform construction and operation services such as customer acquisition and activity, and help enterprises guarantee the effects of digital transformation. The smart channel product line revenue during the reporting period was 0.308 billion yuan, an increase of 1.46% over the same period last year. 3) Cloud and big data product line: Based on the mobile cloud ecosystem, it runs through all aspects of cloud solutions, cloud migration, and cloud operation and maintenance, focusing on customized supporting solutions for enterprises to go to the cloud; providing enterprises with a full range of data collection, processing, mining and analysis, security, governance and other products and overall solutions. During the reporting period, the cloud and big data product line revenue was 0.189 billion yuan, an increase of 11.57% over the same period last year.

Actively embrace the Hongmeng ecosystem and accelerate the intelligent application of Hongmeng's end side. In the first half of the year, the company officially signed a contract with Huawei, which built a complete Hongmeng App development integration framework to create a complete Hongmeng App client technology architecture, and reached a Hongmeng cooperation. It is an ecological market service provider of the Huawei Developers Alliance. It is the main component and supports customers to develop various Hongmeng mobile apps. The company is currently cooperating with China Mobile to develop the Hongmeng version of the app application system for China Mobile. The R&D work for the Hongmeng version of the operator and the 1.0 version of the e-commerce baseline has been completed, and access to the Hongmeng “Xiaoyi” smart application has been expanded. In the future, the company will accelerate the diversified intelligence of Hongmeng's end-side applications to help customers upgrade intelligently.

Investment advice: The company's basic business market is relatively stable and actively embraces the Hongmeng ecosystem. Considering short-term performance pressure, the company's profit forecast was lowered. The company's net profit forecast for 2024-2026 is expected to be 0.317/0.378/0.446 billion yuan, respectively, -2.43%/19.43%/17.89%. The corresponding PE is 25/21/18 times, respectively, maintaining the recommended rating.

Risk warning: Technology research and development progress falls short of expected risk; AI development falls short of expected risk; policy advancement falls short of expected risk; downstream enterprise demand falls short of expected risk; industry competition increases risk.