Incident: The company released its 2024 semi-annual report. 24H1 achieved revenue of 0.781 billion yuan, a year-on-year increase of 6.53%; net profit to mother was 0.118 billion yuan, a year-on-year decrease of 52.92% due to a decrease in the fair value of the Henan Lantian Xinchuang Industrial Investment Fund held by the company; net profit after deducting non-attributable net profit of 0.123 billion yuan, a year-on-year increase of 6.58%.

It accurately meets the digital intelligence needs of customers. All three product lines have achieved growth. With the new round of artificial intelligence technology revolution spawned by AIGC, the digital economy has accelerated industrial transformation. The company closely revolves around AI and metaverse two-wheel drive strategies to deeply innovate and comprehensively upgrade the three product lines to accurately meet the intelligent and digital needs of customers. 24H1's core businesses have developed steadily and achieved good performance.

Collaborative office product line: 24H1's original RichMail Xinchuang email and collaborative office business grew steadily, while continuing to intelligently upgrade its product line, achieving revenue of 0.245 billion yuan, an increase of 13.22% over the previous year. Based on the company's one-stop AI application development platform Rich AIBox, we create a digital employee product, using the big model as an intelligent brain, opening up the company's internal knowledge base through self-developed RAG capabilities, using Agent capabilities to integrate the original capabilities of the enterprise's internal information system, providing tailored technical solutions for N business scenarios such as smart office, channel marketing, and customer service applications; seamlessly integrating and optimizing enterprise business processes to create digital employees unique to everyone. It supports customers to develop intelligent and personalized AI functions in the 139 mailbox series, and supports the normal operation of email products in the new version of the Hongmeng system to meet the coverage of mailboxes in Xinhongmeng. Major customers include China Mobile, China Mobile Internet of Things, China Mobile Information, China Mobile Online, HUAWEI Cloud, China Southern Power Grid, China Insurance, Bank of China, Bank of Shanghai, China Construction, and Poly Group.

Smart channel product line: 24H1's core stock business increased steadily, with strong customer stickiness and close cooperation, achieving revenue of 0.308 billion yuan, an increase of 1.46% over the previous year. Vigorously invest in the R&D of innovative products integrating AI+ digital human technology, 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. The company officially signed a contract with Huawei and reached a cooperation with Hongmeng. A complete Hongmeng App development integration framework has been built, covering multiple dimensions such as development, testing, operation and maintenance, operation, and monitoring to ensure the stability of the mobile technology architecture. In terms of security, we guarantee security construction at multiple levels, such as application security, data security, and terminal security, create a complete Hongmeng App client technology architecture system, and support customers to develop various Hongmeng mobile apps.

Cloud and big data product line: 24H1 continued to maintain steady growth, achieving revenue of 0.189 billion yuan, an increase of 11.57% over the previous year.

In terms of cloud services, we assist customers to provide professional cloud consulting services and solutions nationwide, complete high-quality delivery, support customers to develop AI functions for C-cloud products, implement more than 20 AI algorithms including portrait animation, document classification, image segmentation, graphic text, image editing, etc.; create intelligent cloud disk assistants integrating conversation assistants, application assistants, search assistants, document assistants, content assistants, and writing assistants.

In the field of computing power, we jointly develop Rich AIBoost, a next-generation AI computing power cluster management platform; integrate the ecological capabilities of hardware vendors, jointly promote and sell Shengteng server products, and create intelligent computing center service capabilities integrating software and hardware.

New AI technology+virtual digital human, two-wheel drive MMS innovation

The company has an early layout in the field of artificial intelligence and has deep technical accumulation and innovation capabilities. At the basic model level, it has accumulated capabilities such as unified access management of various large models, fine tuning of large models in vertical fields, and construction of NLP/CV exclusive small models; it has built up core technical capabilities such as multi-modal search enhanced generation (RAG) and agents (agents) in the large model application layer. Integrating technology with business scenarios and innovating, we launched the MMS RiChai Gigafactory to provide customers with more efficient and intelligent products and solutions. In the field of digital people, Caixun Co., Ltd. is a governing unit of the China Virtual Reality and Metaverse Industry Alliance. In recent years, it has actively promoted “virtual reality +”, strengthened endogenous capabilities for metaverse-related technology applications. Based on the underlying technical architecture, the “Point Cloud-Topology-Model Technology Stack” explores AIGC-3D modeling technology routes, RTI (Real-Time Interactive) scenarios and? Many core technical capabilities, such as real-time color interaction, reconstruct application scenarios.

Issuing equity incentives, performance evaluation indicators highlight confidence in development

In June '24, the company released the “2024 Restricted Stock Incentive Plan (Draft)”, which has now been granted. The company's performance assessment target is no less than 16.00%, 34.56%, and 56.09% in 24-26 net profit compared to 23-year non-return net profit, increasing by more than 16% year on year, showing confidence in future development.

Profit prediction and investment advice: The company is deeply involved in the digital economy, actively embraces AIGC technology, and has strong R&D capabilities. Along with the development trends of the Xinchuang industry and state-owned clouds, the number of orders is expected to grow rapidly in the future. Considering the uncertainty of the company's layout innovation or large investment and profitability, and the impact of reduced earnings from changes in fair value of the company, net profit is estimated to be 0.264/0.332/0.399 billion yuan (original value was 0.34/0.432/0.541 billion yuan) for 24-26, corresponding PE is 23/18/15X, maintaining a “buy” rating.

Risk Warning: Increased industry competition, AI development falls short of expectations, Xinchuang development falls short of expectations, state-owned cloud development falls short of expectations, rising labor costs, and risk of brain loss