Incident: The company released its 2024 semi-annual report, achieving revenue of 0.873 billion yuan, a year-on-year decrease of 13.07%; realized net profit to mother of -0.206 billion yuan, compared to -0.212 billion yuan in the same period last year; realized deducted non-net profit of -0.216 billion yuan, compared to -0.222 billion yuan for the same period last year.

The quality of revenue has improved significantly, and revenue from new businesses has maintained a good growth rate. In 2024 H1, the company actively responded to industry and market developments and continued to promote strategies to improve quality and efficiency. Revenue quality improved markedly, and gross margin increased 7.86 percentage points year-on-year. Total expenses for the period decreased by 2.63% year on year. Among them, the company's early layout of new directions and technology was basically completed, R&D expenses decreased by 5.80% year on year, and management expenses decreased by 30.64% year on year; the company continued to invest in marketing, and sales expenses increased 9.71% year on year. In terms of new business directions, cloud security revenue increased 51.52% year on year, cloud computing revenue increased 35.80% year on year, and Xinchuang security revenue increased 22.99% year on year. In terms of industry segments, revenue from the health industry increased 46.45% year on year, revenue from the energy industry increased 33.42% year on year, revenue from the political and legal industry increased 31.13% year on year, and revenue from the transportation industry increased 15.63% year on year.

Policy support promotes the release of security needs, and future development will improve for a long time. In January 2024, the National Data Administration officially released the “Data Elements ×” Three-Year Action Plan (2024-2026), which proposes “by the end of 2026, to create more than 300 exemplary, highly visible and dynamic typical application scenarios. The data industry will grow at an average annual rate of more than 20%, and the scale of data transactions will double”. The State Council issued a notice on the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, which proposes that by 2027, the scale of equipment investment in the fields of industry, agriculture, construction, transportation, education, cultural tourism, medical care, etc. will increase by more than 25% compared to 2023, which will promote the upgrading of cybersecurity equipment in related industries. With the implementation of major national strategies and the advancement of security capacity building in key areas, the cybersecurity and data security market demand will continue to be released, bringing new business volume to the company.

“AI+Safety” is deeply integrated to actively lay out new quality productivity. In 2024, the company actively explored the deep integration and innovation of “AI+ Security”, and released a series of products such as the Tianwen Big Model System, the product Xiaotian, and the Tianwen Intelligent Computing Cloud Platform to achieve full AI empowerment. Furthermore, the company is active in the fields of low-altitude economy, vehicle-road cloud integration, and satellite internet security. In the field of low-altitude economy, we provide network security, data security, and cloud computing products and solutions; in the field of integrated vehicle road cloud security, we have formed an integrated security protection system for clouds, tubes, terminals, and edges, and launched intelligent connected vehicle security solutions; in the field of satellite internet security, we have launched network security solutions such as satellite application service platforms and satellite remote sensing systems, which have been implemented in China and in many countries along the “Belt and Road”.

Profit forecast: Considering that the macroeconomy is still recovering, due to prudential considerations, the company's net profit forecast for 2024-2026 was lowered to 0.263/0.358/0.41 billion yuan (adjustment range: -32.0%/-31.7%/-25.3%).

The 2024-2026 PE was 19x/14x/12x, maintaining the “Overweight” rating.

Risk warning: Market competition has intensified, and the development process of the cybersecurity industry has fallen short of expectations.