occurrences

The company released its 2024 semi-annual report.

Comment:

Outstanding performance, with double-digit month-on-month growth in the second quarter

With 2024H1, the company achieved revenue of 3.053 billion yuan, an increase of 15.04% year on year; realized net profit of 0.631 billion yuan, an increase of 56.18% year on year; net profit after deduction of 0.618 billion yuan to mother, an increase of 61.60% year on year. On the cost side, 2024H1, the company's sales/management/ R&D expenses rates were 18.02%/16.36%/6.33%, respectively, and -8.42/+3.19/+0.14pct, respectively. On a quarterly basis, 24Q2 achieved revenue of 1.564 billion yuan in a single quarter, +8.53% YoY, +5.13% month-on-month; net profit to mother achieved 0.336 billion yuan, +48.73% YoY and +13.88% month-on-month.

The performance of old game products is steady, and new products are ready for launch in the second half of the year

In terms of the game business, 2024H1 achieved revenue of 2.426 billion yuan, an increase of 12.03% over the previous year. Among them, the old product “City of the Rising Sun”, which had been on the market for more than 5 years, achieved revenue of 1.789 billion yuan, an increase of 21.43% over the previous year and optimized promotion and marketing expenses. “War and Order”, a product that has been launched for more than 8 years, achieved revenue of 0.559 billion yuan, or -1.79% over the same period. The company plans to launch two new “SLG+ simulation management” overseas at the end of the year, respectively, the sci-fi themed code “DL” and the civilization-themed “LOA” code name. Among them, the game codenamed “DL” has already obtained a domestic version number, and an applet version will also be released when it is launched domestically.

AI empowers the computer business, and the Internet of Things/innovation business contributed incremental computer business. 2024H1, the company's AI/ICT operation and maintenance management, Internet of Things/communications, and innovative service businesses achieved revenue of 0.543 billion yuan, 0.02 billion yuan, and 45 million yuan respectively, with year-on-year increases of 27.06%, 107.96%, and 43.71%, respectively. ICT operating products continue to be iterated, and the business is growing steadily. The company uses self-developed NLP technology to promote the rapid implementation of AI in multiple vertical fields such as intelligent customer service and smart public security. As of 24H1, the company has applied for 361 patents in the AI field. The company develops the Internet of Things/innovative business, deeply integrates the Internet of Things, communication and ICT technology, provides intelligent inspection and intelligent inspection services for power grids, nuclear power, and key security areas, and provides cost-effective cross-border data traffic services.

Investment advice and profit forecasting

Driven by the company's gaming and computer business, the core products in the game business performed well, and the launch of new products in the second half of the year supported continuous growth in performance over a long period of time. We expect to achieve net profit of 1.186/1.343/1.525 billion yuan in 2024-2026, and EPS of 0.60/0.68/0.78 yuan, corresponding to 14/12/11 times PE, maintaining a “buy” rating.

Risk warning

Risk of product performance falling short of expectations; risk of changes in industry policy; risk of increased industry competition, etc.