Key points of investment:

24H1's revenue and profit performance is impressive, and the SaaS business is growing rapidly. The company discloses its 2024 semi-annual report.

24H1 achieved revenue of 0.739 billion yuan, up 26.7% year on year; gross profit of 0.393 billion yuan, up 22.3% year on year; adjusted net profit of 0.048 billion yuan, which was -0.024 billion yuan in the same period last year, turning a loss into a profit. By business, SaaS revenue was 0.4 billion yuan, up 30.4% year on year, gross profit margin was 88.3%, up 1.2 pct year on year; revenue from precision marketing services was 0.339 billion yuan, up 22.59% year on year.

Both SMB (Small and Medium Business) and KA (Big Customer) businesses showed strong growth rates. The company uses SMB as the number one business growth curve. T cloud products solve the customer acquisition difficulties of middle and lower B2B enterprises, generate online marketing platforms and content through AI, intelligently match content distribution channels, gather business opportunity leads, and promote marketing customer acquisition conversion rates. With KA as the second business growth curve, Zhenke products promote the refined operation of large enterprise customer assets, and rely on the intelligent AI brain in the marketing center to drive marketing automation systems to perform thousands of maintenance on existing customers; KA's business is industry-based and focuses on key industries such as consumer retail, automobiles, healthcare, finance and manufacturing. The company established or maintained good business relationships with well-known companies such as Weichai Power, Chery Automobile, Huaxia Bank, Panasonic Electric, Zhengguanzhuang, Baolun, and Meituan in the first half of 2024. In 24H1, the company's total number of users increased 13.1% year over year, and the average monthly revenue per user increased 16.5% year over year. Both SMB and KA showed strong growth rates.

The vast market space for marketing and sales SaaS has yet to be penetrated, and the time is right for digital intelligence to develop. According to the company's 2024 semi-annual report, citing Frost & Sullivan data, the potential market space for marketing and sales of the SaaS market will reach 4.3 trillion yuan by 2027, and most of the market is still awaiting continuous penetration by leading SaaS companies. According to Frost & Sullivan data, according to 2023 revenue, the company is the largest marketing and sales SaaS solution provider in China. Currently, the company's main revenue sources are still mainly in Tier 1 and 2 cities in the Yangtze River Delta and Pearl River Delta. We believe that with the strong support capabilities of the Marketingforce platform, the company is expected to further expand its customer base and market share by expanding the coverage area of the direct sales team and increasing cooperation in the industry ecosystem.

Profit forecasting and investment advice. We expect the company's revenue for 2024-2026 to be 1.508/1.99/2.702 billion yuan, up 22.4%/31.9%/35.8% year on year; net profit to mother will be -0.108/-0.058/0.018 billion yuan, respectively, up 36.1%/46.1%/130.6% year on year. Referring to comparable companies, considering that the company is in a stage of rapid growth, the company was given 17-18 times the 2024 dynamic PS. Based on 2024 operating income of 1.508 billion yuan, the reasonable market capitalization range is 25.64-27.148 billion yuan (27.869-29.509 billion yuan, converted according to 1 HKD = 0.92 yuan), and the corresponding reasonable value range is RMB 109.03-115.44 (118.51- HK$125.48, based on HKD1 = RMB0.92) /share, maintaining the “superior to the market” rating.

Risk warning. Market demand falls short of expectations; business development falls short of expectations; market competition intensifies.