Performance performance

The company published its 2024 interim report on August 26, 2024

[Overall performance]

(1) 2024H1 revenue of 1.58 billion (+10.10%), net profit due to mother 0.085 billion (+6.39%), net profit of non-return to mother 0.035 billion (+16.44%).

(2) 2024Q2 revenue 0.81 billion (+16.02%), net profit attributable to mother 0.059 billion (+36.35%), net profit not attributable to mother 0.015 billion (+8.67%).

[Business Segmentation]

According to the main business segment, the fintech business achieved revenue of 0.839 billion yuan (+6.69%), the smart IoT business achieved revenue of 0.489 billion yuan (+15.50%), the smart energy information technology business achieved revenue of 0.191 billion yuan (+22.74%), and the smart supply chain information technology business achieved revenue of 0.042 billion yuan (-14.17%) [gross profit ratio, cash flow] 2024 H1 gross profit margin 26.08% (0.56 pct year-on-year decrease) , 24Q2 gross profit margin 27.50% (year-on-year decrease of 1.44pct); 2024H1 net operating cash flow -0.254 billion; 24Q2 net operating cash flow -0.028 billion.

[Fee rate]

In 2024, the H1 sales/management/R&D expense ratio was 3.36%/9.34%/9.15%, the sales expense ratio increased by 0.16 pct year on year, the management cost ratio increased 0.14 pct year on year, and the R&D cost rate decreased by 1.59 pct year on year.

In Q2 2024, the sales/management/R&D expense ratio decreased by 3.54%/9.58%/10.26%, the sales expense ratio decreased by 0.13 pct year on year, the management expense ratio decreased by 1.15 pct year on year, and the R&D cost rate decreased by 2.56 pct year on year.

The revenue growth rate of the main business is impressive. OpenHarmony and OpenEuler's 24H1 smart IoT business can be expected to achieve revenue of 0.489 billion yuan, an increase of 15.50% over the previous year. The company used its outstanding technology research and development advantages accumulated on the domestic open source operating system (OpenHarmony, OpenEuler) platform to establish end-to-end to cloud, for smart finance, smart energy, smart cities, smart healthcare, industrial connectivity, smart education, smart parks, smart commerce and other industries Build “cloud-edge-end” efficient, secure and collaborative solutions.

Costs are further optimized, and profits are expected to continue to improve

The company's 24Q2 initial expenses were gradually reduced, and sales, management, and R&D expenses were all reduced. 24H1 net profit without return to mother grew 16.44% year on year, and Q2 net profit growth rate was 36.35% year on year. As the company continues to deepen in the Huawei industry chain, we believe that the company's performance may continue to improve.

Profit forecasting and valuation

Considering the effects of the joint promotion of the Xinchuang policy and industry demand, we expect the company to achieve operating income of 4.001/5.178/6.679 billion yuan in 2024-2026, with year-on-year growth rates of 28.81%/29.41%/28.99%, respectively, corresponding PE 65.03/47.66/35.29 times. Based on the company's position at the core of Huawei's industrial chain, it maintains an “gain” rating.

Risk warning

Risk of technological innovation and new product development, risk of market competition falling short of expectations, risk of rising labor costs