Revenue and net profit to mother continued to grow in the first half of the year. 24H1, the company's revenue was 3.76 billion yuan, +44.1%; net profit to mother was 0.85 billion yuan, +25.97%; after deducting not 0.82 billion yuan, +32.1%. Q2 In a single quarter, the company's revenue was 2.17 billion yuan, +49.7%; the mother returned 0.56 billion yuan, +28.95%. The company's overall operating indicators continue to grow, which means that market demand continues to grow and the company's products continue to be iteratively upgraded. In addition, the company has stepped up its market expansion efforts, industry applications involving related products and the emerging AI big model industry have gradually increased, and product recognition has been further enhanced.

The company's inventory has been further improved, and the supply of products is stable. The company's inventory reached 2.46 billion yuan at the end of the current period, 1.07 billion yuan at the end of '23, and 1.71 billion yuan at the end of the 24Q1 period. Meanwhile, the company's 24H1 advance payment was 3.09 billion yuan, 2.39 billion yuan at the end of last year, and reached 2.61 billion yuan in 24Q1. Since Q4 '23, the company's inventory and prepayments have continued to grow, and the stability of product supply has continued to improve.

The company has increased investment in R&D, and the prospects for CPU and DCU are good. 2024H1, the company invested 1.37 billion yuan in R&D, +11.5%. R&D investment accounted for 36.46% of total revenue. The number of R&D personnel in the company reached 1,855, an increase of 34% over the previous year. The company's CPU and DCU products continue to be iteratively upgraded, and the CPU supply is stable, which is expected to benefit from the Xinchuang process. The company's DCU has excellent ecology and full accuracy capabilities, and can be used for large-scale model training and inference. It has achieved comprehensive application of large models such as LLLama, GPT, Bloom, ChatGlm, Wudao, and Zidongtai, and is fully compatible with large domestic models such as Wenxin Yifan and a Thousand Questions of Common Sense.

The industrial chain is rich in ecological resources. Haiguang's mainstream server vendors in the United Nations cover many forms of products, such as general-purpose rack servers, artificial intelligence servers, blade and high-density servers, storage products, visual workstations, and edge computing products. The company relies on the photosynthesis organization to continue to increase investment in ecological construction. Up to now, the company has achieved research and development of more than 8,000 collaborative technologies such as software and hardware optimization through collaboration with more than 4,000 relevant innovators, including upstream and downstream enterprises and industry users in the industrial chain, and has jointly created more than 0.012 million safe, easy-to-use, and open products and joint solutions, and set up 24 regional branches and 23 adaptation centers.

We forecast that the company's earnings per share for 2024-2026 will be 0.78 yuan, 1.23, and 1.63 yuan respectively (the original 24-25 forecast was 0.75 and 1.12 yuan, respectively, which mainly increased revenue and gross profit margin). Considering the good prospects for the company's CPU and DCU, we are optimistic about the company's long-term growth space and use the absolute valuation method (FCFF) to give a target price of 96.79 yuan to maintain the purchase rating.

Risk warning

Due to geopolitics, streaming progress falls short of expectations, customer concentration is at high risk, and demand in important industries falls short of expectations.