Yinghantong released its 2024 semi-annual report. 1H24 achieved revenue of 0.261 billion yuan, up 10.29% year on year; net profit to mother of 53.42 million yuan, up 14.71% year on year; deducted non-net profit of 49.76 million yuan, up 15.46% year on year; gross profit margin of 52.5%, up 3.7 pct year on year. Looking at a single quarter, Q2 achieved revenue of 0.155 billion yuan, up 8.8% year on year and 46% month on month; net profit to mother was 37.13 million yuan, up 128% month on month; after deducting non-net profit of 35.01 million yuan, up 137% month on month.

Overseas factories have achieved production capacity, and the level of globalization continues to rise. The company takes globalization as its strategic core and builds a “domestic+overseas” independent production system. Factories in Thailand and Canada have achieved large-scale production and formed a three-region supply chain system with the Jiaxing base to deal with trade risks, stabilize supply, raise the level of internationalization of the supply chain; strengthen production and warehousing capabilities in key regions in Europe and the US, and further cover the global regional market. The company's sales business covers China, America, Europe, Asia Pacific and domestic and foreign e-commerce, and has established a sales structure for all sales platforms. Enhance competitiveness in overseas markets through training and continuous expansion of sales channels. 1H24's overseas revenue was 116.71 million yuan, up 48.24% year over year. The company has an in-depth understanding of industry trends from a global perspective, and has 1 US subsidiary, 1 Canadian subsidiary, and 1 German subsidiary.

Deeply involved in the field of industrial Internet, enterprise network business has grown significantly. According to statistics from the China Academy of Information and Communication Technology's “White Paper on the Global Digital Economy (2024)”, China's digital economy is developing rapidly, with industrial digitization accounting for 86.8%. The industrial Internet industry is expected to exceed 1.5 trillion yuan in 2024. The enterprise network segment SDWAN reconstructs multi-branch enterprise network architectures in a software-defined manner and has become the choice of most enterprises. According to IDC and Gartner statistics, the SD-WAN market CAGR will remain at 56.1%. The company continues to iterate products in response to customer needs. Industrial IoT products achieved revenue of 0.136 billion yuan, an increase of 19.8% over the previous year; revenue from enterprise network products was 34.63 million yuan, an increase of 126% over the previous year.

Actively enter the field of AI and strengthen R&D and innovation capabilities. The company is deeply involved in the core technology of the industrial Internet, and has the ability to deeply integrate vertical applications and innovate across borders. 1H24 invested 27.89 million yuan in R&D, accounting for nearly 40% of R&D personnel. Launched new digital and intelligent products, including the EC3000 and EC5000 series AI edge computers. Actively entering the AI field, successfully launched a variety of AI products in the fields of electricity, smart commerce and industry to help intelligent manufacturing and driving, and radiate domestic and foreign markets through channel advantages.

Investment suggestions: Benefiting from the rise in demand for the Industrial Internet of Things under the digital economy wave, the improvement of the company's independent innovation capabilities is expected to bring about an overall improvement in the quality of the main business and further optimization of profit levels. We expect the company's operating income to be 0.599/0.712/0.895 billion yuan respectively in 24-26, and the net profit to mother will be 0.118/0.156/0.209 billion yuan respectively; corresponding to the closing price of August 23, 2024, the P/E will be 15x/12x/9x, respectively, maintaining the “recommendation ” Ratings.

Risk warning: The company's technology updates fall short of expectations, industry market competition intensifies, and the strength and duration of global policy promotion falls short of expectations.