Revenue growth in the first half of the year was resilient, and profit performance stabilized markedly. The company released its mid-year report for the first half of the year, with revenue of 0.661 billion yuan (+17.31%), net profit attributable to mother of 0.192 billion yuan (-12.11%), and net profit of non-return to mother of 0.197 billion yuan (-2.78%). Looking at Q2 alone, the company's revenue was 0.372 billion yuan (+13.89%), net profit attributable to mother was 0.046 billion yuan (+39.57%), and net profit not attributable to mother was 0.047 billion yuan (+41.07%).

The core business has maintained rapid growth, and all industries have performed well. In the first half of 2024, the company's total network security products and security services increased 16% year over year. The company continued to promote product restructuring, increase the revenue share of standardized products, and improve the delivery efficiency of solution services. Among them, solution business revenue increased 41% year over year, accounting for 37% of revenue; standardized products, mainly endpoint security products, accounted for 53% of revenue, maintaining a high gross profit margin of over 80%. The company's revenue from the carrier industry increased 16% year on year, accounting for 32%; revenue from the non-operator industry increased 18% year on year, accounting for 68% of revenue. Among them, revenue from the four major industries of finance, government, enterprise and energy increased 19% year on year, accounting for 65%.

Expenses continue to be optimized, and R&D and sales are actively iterated. The company continues to increase cost control, the number of personnel has declined, continues to implement the management awareness of each business unit contributing to growth, profit, and cash flow, and improving efficiency per capita. The year-on-year change in sales, management, and R&D expenses was +7.72%, -1.97%, and +6.54%. Investment in R&D and sales is still high. For example, the R&D side trust cube model, terminal security (TrustOne), XDR SaaS (ImmunityOne), and cloud security (ForCloud) have all been greatly upgraded. The sales side adjusts sales resources in due course according to the pace of recovery in downstream demand, focuses on the valuable customer base, and also reorganizes the operator's sales and pre-sales systems.

Lay out new fields and continue to create growth points. In the direction of computing power networks, the company has successively implemented computing power security solutions and services at the Xiyun Intelligent Computing Center, the Ningxia Hub Cloud Security Integrated Construction Project, and the iFLY Spark Model Intelligent Computing Center of HKUST. The order amount has reached the level of 100 million yuan. In terms of satellite internet, in early 2024, the company participated in Series A financing of Shanghai Yuanxin Satellite, the core enterprise of “G60 Starlink”. In May 2024, the two sides reached a strategic cooperation. In June 2024, ASIC Security exclusively undertook the security consulting service project of Shanghai Yuanxin Satellite. The two sides have extensive scope for cooperation in various types of business in the future.

Risk warning: Macroeconomics affects IT spending; industry competition intensifies; new business development falls short of expectations.

Investment advice: Maintain profit forecasts and maintain a “better than the market” rating. The estimated revenue for 2024-2026 is 1.931/2.353/2.793 billion yuan, with growth rates of 20%/22%/19%, respectively, and net profit to mother of 0.014/0.123/0.216 billion yuan, corresponding to current PE 302/34/19 times. The company maintained a positive growth trend in the first half of '24, maintaining a “superior to the market” rating.