Incident: Recently, the company disclosed its semi-annual report. 2024H1 achieved total operating income of 4.94 billion yuan, -14.0% year on year; net profit to mother of 4.06 billion yuan, -4.0% year on year; basic earnings per share of 0.26 yuan, -3.6% year on year; and weighted average return on net assets of 5.52%, -0.78pct year on year.

The scale of fund consignment sales remained steady, and rate adjustments limited revenue performance. 2024H1, the company's Internet financial e-commerce platform achieved 86.03 million fund subscription transactions, of which 54.33 million non-cargo subscription transactions reached 54.33 million, -30% year over year; fund sales volume was 851.4 billion yuan, +4% year over year, of which the non-cargo base sales scale was 499.7 billion yuan, or -1% year over year. Affected by increased competition in consignment channels and rate adjustments, the total revenue of 2024H1's financial e-commerce services was -30% to 1.41 billion yuan compared to the same period last year.

The share of brokerage business increased slightly, and revenue from proprietary business increased significantly. 1) In the brokerage business sector, 2024H1 achieved a net income ratio of -10% to 2 billion yuan from the securities brokerage business, mainly due to the decline in securities trading revenue; Dongcai Securities's share base transaction volume was -6% to 9.2 trillion yuan, and the market share ratio was +0.05 pct to 4.00% year over year. 2) In the two finance business segment, 2024H1 achieved net interest income of -8% to 1.03 billion yuan. The balance of the two finance business narrowed. The financing capital of the two finance business at the end of 2024H1 was -6% to 42.37 billion yuan compared to the beginning of the year. 3) In the proprietary investment sector, 2024H1 achieved a year-on-year increase in investment income plus fair value change income (not included in total operating income) of +42% to 1.64 billion yuan, mainly benefiting from a significant year-on-year increase in income from the securities self-operated fixed income business.

R&D investment continues to rise, and major financial models continue to break through. 2024H1's total operating costs were -4% to 2.07 billion yuan, with sales, management, and R&D expenses being -37%, -2%, and +10%, respectively. The company continues to make breakthroughs in AI research and development, and the self-developed “fantastic” financial model continues to be iteratively upgraded, and capabilities in multi-modal derivation and financial agent construction are constantly being strengthened. I am optimistic that the company will continue to increase AI research and development efforts and enable diversified financial scenarios.

Investment advice: Maintain a buy-A investment rating. The company's 2024H1 performance continues to be affected by market sentiment. Revenue from fund brokerage, brokerage, and finance businesses all declined, but the profit decline was narrower than the decline in revenue due to the increase in self-employment income, and the fund consignment scale and brokerage business market share are still resilient. Looking forward to the future, the company is expected to fully unleash its performance flexibility with the recovery of market sentiment, with the accumulation of its own user stock and deep cultivation of digital intelligence. We expect the company's 2024-2026 EPS to be 0.55 yuan, 0.61 yuan, and 0.68 yuan respectively, giving the company 23xP/E in 2024, corresponding to a target price of 12.8 yuan.

Risk warning: The equity market fluctuates greatly, industry competition intensifies, macroeconomic decline, etc.