Incident Overview
The company released its 2024 mid-year report. The first half of the year achieved revenue of 1.39 billion yuan, a year-on-year decrease of 5.5%; realized net profit of 0.36 billion yuan, a year-on-year decrease of 21.0%; and realized net profit deducted from non-mother of 0.34 billion yuan, a year-on-year decrease of 23.3%.
Single Q2 achieved operating income of 0.77 billion yuan, a year-on-year decrease of 10.5%; realized net profit of 0.26 billion yuan, a year-on-year decrease of 23.2%; realized net profit deducted from non-mother of 0.25 billion yuan, a year-on-year decrease of 26.3%.
Profits were pressured by declining gross margin and higher cost ratios. 1) By product or service, value-added telecom business revenue in the first half of the year was 0.77 billion yuan, down 11.0% year on year; software sales and maintenance revenue was 0.1 billion yuan, down 7.2% year on year; fund sales and other business revenue was 0.17 billion yuan, down 4.9% year on year; only advertising and internet promotion services grew at a rate of 9.5%.
2) The comprehensive gross profit margin was 84.9%, a decrease of 1.1 percentage points, and the gross margin of all businesses declined to varying degrees.
3) The sales expense ratio, management cost rate, R&D expense ratio, and financial expense ratio were 17.5%, 8.2%, 42.6%, and -11.3%, respectively, an increase of 5.1 percentage points.
4) Net cash flow from operating activities was 0.3 billion yuan, a year-on-year decrease of 27.8%.
5) The company's contract debt was 1.2 billion yuan, up 9.7% year on year, up from the first quarter.
Affected by the general environment of the capital market, demand for financial information services declined, continued investment in AI was affected by various factors at home and abroad, the capital market fluctuated to a certain extent, and investors' demand for financial information services was affected. As of June 30, 2024, the total number of registered users of Tonghuashun Financial Services Network was about 0.63 billion (up 2.08 million from the end of 2023); the average number of daily users of the Tonghuashun Online Market Free Client was about 14.39 million (down 0.6% from the end of 2023), and the number of weekly active users was about 19.21 million (down 0.8% from the end of 2023).
The company continues to invest in new technology, accelerate the deep integration of existing artificial intelligence product business with large models, and continuously improve the competitiveness of products and services. The company has launched products in various fields such as big model+financial investment, big model+intelligent customer service, big model+intelligent investment and research, big model+code generation, big model+legal consulting, big model+office assistant, and big model+translation. With the introduction of new products and the continuous improvement of the company's capabilities, it is expected that the negative impact of the environment on the company's business will be offset or reduced.
Investment advice
We expect the company to achieve revenue of 36.7/41.0/46.3 billion yuan in 2024-2026 (previous value of 40.2/45.9/52.1 billion in 2024-2026, respectively), up 3%/12%/13% year on year (previous value 2024-2026 was 13%/14%, respectively); achieve net profit to mother of 14.5/16.4/18.6 (previous value 15.7/18.2/20.1) billion yuan, up 3%/13%/14% year on year (previous value 2024-2026, respectively) 12%/16%/14% for 2024-2026, respectively), maintaining a “buy” rating.
Risk warning
1) Downstream demand falls short of expectations; 2) R&D breakthroughs fall short of expectations; 3) Market expansion falls short of expectations; 4) Overseas business policy risks.