2Q24 results are in line with our expectations

Yilian Network released its 2024 semi-annual report. In the first half of the year, the company achieved operating income of 2.667 billion yuan, a year-on-year increase of 30.50%; achieved net profit of 1.36 billion yuan, a year-on-year increase of 32.13%; and realized net profit without deduction of 1.253 billion yuan, an increase of 38.62% over the previous year. Corresponding to 2Q24, the company achieved operating income of 1.503 billion yuan, a year-on-year increase of 30.16%; realized net profit of 0.792 billion yuan, an increase of 30.51% year on year; realized net profit deducted from non-mother of 0.733 billion yuan, an increase of 31.91% year on year. The results are in line with previous forecasts and our expectations.

Financial concerns: 1) Gross profit margin. In 2Q24, the company's gross margin was basically the same year on year, and there was no sharp decline. We believe that it has benefited from the company's high margin phone business maintaining a rapid growth trend. Looking at the month-on-month gross margin increase of 1.11 ppt, we think it mainly benefited from the central increase in the US dollar exchange rate. 2) Strong ability to control expenses.

The total cost rate for the 2Q24 period was 10.57%, down 1.14 ppt from the previous year. We believe it was mainly affected by the company's internal expense control measures and the reduction in equity incentive expenses.

Development trends

The revenue performance of phones and conference products was impressive. 1) Telephone business. Benefiting from the gradual recovery in downstream demand and strong demand from dealers to replenish stocks, 1H24 achieved revenue of 1.51 billion yuan, an increase of 20.3% over the previous year. Looking ahead to the second half of the year, we believe that the company is expected to continue to strengthen its competitive advantage from the three perspectives of market, technology, and quality, despite significant macroeconomic uncertainty overseas. 2) Conference products business. 1H24 achieved revenue of 0.95 billion yuan, a year-on-year increase of 51.3%, continuing the high growth trend. The company continues to introduce new products. In July, the company released new microphones CP50 & CPE40 to optimize sound pickup and playback; in August, the company released the high-end small and medium-sized conference room system MVC S40, which has been certified by Microsoft Teams. According to official Weibo disclosure, 2H24 plans to focus on promoting conference room series products such as the audio and video conferencing tablet MeetingBoard 65/75/86 Pro, camera UVC85/UVC40 E2, microphone CM50, and MeetingEye 900 and A40. We believe that with the continuous enrichment of the product matrix, this business segment is expected to continue to maintain a high growth trend. 3) Cloud office terminal. 1H24 achieved revenue of 0.2 billion yuan, a year-on-year increase of 29.3%, and the business is progressing steadily. We expect that in the second half of the year, the company is expected to accelerate the development of the cloud office terminal business by improving quality, broadening channels, and enriching the range.

Continue to give back mid-term dividends to shareholders. According to the company's announcement, Yilian plans to implement the interim profit distribution according to the plan of paying 6 yuan of cash dividends for every 10 shares. This is the second year in a row that the company has carried out mid-term dividends. We believe this reflects the company's attitude of actively sharing operating results with investors, and highlights the company's long-term investment value.

Profit forecasting and valuation

We are essentially maintaining our 2024-25 profit forecast. The current stock price corresponds to 2024-25 15.9, 13.7 times P/E multiples. We keep the company's target price and industry rating unchanged. The target price corresponds to 23.0 and 20.0 times P/E in 2024-25, and there is still room for a 45% increase from the current stock price.

risks

Overseas macroeconomic uncertainty, new business progress falling short of expectations, exchange rate risk.