Leading manufacturer of emerging safety tracks maintains a “buy” rating

Considering changes in the external environment, we lowered the company's 2024-2025 net profit forecast to 0.004 and 0.075 billion yuan (the original forecast was 0.158 and 0.234 billion yuan), added the 2026 forecast to 0.192 billion yuan, EPS was 0.04, 0.73, and 1.88 yuan/share. The current stock price corresponds to 2024-2026 PE of 661.3, 38.0, and 14.8 times, taking into account the company's card position and long-term growth on the emerging safety circuit Potential to maintain a “buy” rating.

Q2 Revenue growth has recovered, and significant results have been achieved in reducing costs and increasing efficiency

(1) In the first half of 2024, the company achieved operating income of 0.698 billion yuan, a year-on-year increase of 0.29%; net profit to mother was 0.276 billion yuan, and losses narrowed by 32.56% year-on-year. Among them, Q2 achieved revenue of 0.417 billion yuan in a single quarter, an increase of 15.96% year on year; net profit to mother was 0.075 billion yuan, and losses narrowed by 65.68% year on year.

(2) The company's gross sales margin in the first half of the year was 55.15%, an increase of 1.23 percentage points over the previous year. At the same time, the company continues to improve per capita efficiency and operating quality. The total cost of sales expenses, R&D expenses and management expenses decreased by more than 25% compared to the same period last year, and the share of the three fees in revenue decreased by more than 30% compared to the same period in 2023; per capita revenue increased by more than 16% year on year.

Core racetrack products are growing steadily, and market competitiveness is constantly increasing

(1) In terms of products, data security is deeply integrated with the power of the Everbrain-Security Domain Model, and revenue increased by more than 150% year over year; commercial cryptographic revenue increased by more than 100% year over year; and Xinchuang Security revenue increased by more than 80% year over year; at the same time, the company's customer stickiness increased, repurchase revenue increased dramatically, and subscription revenue continued to show a positive growth trend.

(2) On the industry side, for example, revenue from the power industry increased by more than 150% year on year; revenue from central state-owned enterprises and the telecommunications sector all increased by more than 60% year on year; the government industry also achieved steady revenue growth, with revenue from big data bureaus growing rapidly. In the first half of 2024, the company achieved relatively rapid growth in order volume in key industries such as electricity, transportation, and Internet communication, while public security, oil and gas industries also achieved rapid growth in the second quarter.

Risk warning: The risk that government spending is tight; business development falls short of expectations; and market competition is intensifying.