Incident: On August 23, Guang Li Wei released its 2024 mid-year report. In the first half of 2024, it achieved operating income of 0.172 billion yuan, an increase of 34.86% year on year; achieved net profit of 0.003 billion yuan, a year-on-year decrease of 88.90%; and realized net profit without deduction of 0.004 billion yuan, which turned negative year on year. Among them, in the 2Q24 single quarter, the company achieved revenue of 0.128 billion yuan, up 21.21% year on year, up 191.25% month on month; realized net profit of 0.025 billion yuan, up 35.21% year on year, up 211.08% month on month; realized net profit without return to mother 0.022 billion yuan, up 26.91% year on year and 186.13% month on month.

Revenue increased dramatically, and R&D investment continued to expand. With the gradual recovery of industry prosperity, the company's accumulation of EDA software was gradually released, and business indicators such as the company's revenue scale grew relatively well. In the first half of 2024, the company's revenue increased by 34.86% year on year, including revenue from software development and licensing business increased by 86.81% year on year; the company's net profit to mother decreased by 88.90% year on year in the first half of the year. The company always takes technological innovation as the foundation for development, continuously increases investment in R&D, and guarantees the advantages of the company's advanced products and technology. In the first half of 2024, the company spent 0.132 billion yuan on R&D, an increase of 41.77% year-on-year.

Using domestic EDA to replace Dongfeng, software and hardware are developed collaboratively. The company has fully benefited from the increase in the localization rate of EDA, and is pursuing the collaborative development of software and hardware while further improving the layout in the EDA field. In the EDA business, the core module of the company's DFM tool has made significant progress. Currently, CMPEXP has been tested by many leading domestic companies; during the reporting period, the company's DFTEXP solution business expanded smoothly, and has been applied to many customers and achieved sales revenue. The product's technical performance has reached the standard tool level, and has received a good reputation in the industry.

In the data analysis software business, the company officially released the semiconductor artificial intelligence application platform INF-AI during the reporting period, and was introduced and used by many customers; in the equipment business, the company optimized and upgraded the T4000 T4000 Max model, and collaborated to develop functions such as the reliability test and analysis system WLR to expand the equipment from WAT testing to WLR and SPICE fields.

Improve the layout of the industrial chain, and stable cooperative relationships with downstream customers. The company's data platform has now formed an internationally competitive data analysis and management system, which can cover the entire life cycle data of integrated circuit chip product design and manufacturing, can provide customers with one-stop efficient solutions, and gradually improve the industrial chain layout.

At present, the company's advanced solutions have been successfully applied to major Asian Foundry manufacturers such as Huahong Group, Samsung Electronics, Yuexin Semiconductor, Hefei Jinghe, Changxin Storage, etc., as well as some well-known Fabless manufacturers. Benefiting from the expansion of downstream fab production capacity and domestic substitution trends, the company has plenty of orders for WAT test equipment, and its performance is expected to maintain rapid growth.

Investment advice: The company has accumulated deep accumulation in the fields of EDA, data analysis software, and WAT equipment, and the software and hardware business maintains a growth trend. We expect the net profit to the mother for 24/25/26 to be 0.152/0.244/0.363 billion yuan, an increase of 17.8%/60.5%/49.2% year-on-year, corresponding to the current PE price 50/31/21 times. The company's business expansion has accelerated and maintained a “recommended” rating.

Risk warning: risk of slowing industry development; risk of high customer concentration; risk of seasonal revenue fluctuations.