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The company released its 2024 semi-annual report. In the first half of 2024, it achieved operating income of 0.8 billion yuan, a year-on-year increase of 12.39%; net profit to mother was 0.255 billion yuan, and losses were reduced by 38.64% year on year. After deducting net profit to mother - 0.265 billion yuan, loss decreased by 38.46% year on year.

In terms of Q2 alone, 2024Q2 achieved operating income of 0.443 billion yuan, an increase of 15.75% year on year; net profit to mother was 0.105 billion yuan, and loss was reduced by 55.23% year on year. After deducting net profit from back to mother - 0.11 billion yuan, loss was reduced by 54.6% year on year.

reviews

Q2 Revenue growth accelerated again. Operators and financial industries achieved relatively rapid growth. By sector, operators, finance, energy and enterprises, government institutions, and others achieved revenue of 2.69, 0.145, 0.167, and 0.22 billion yuan, respectively, +50%, +17%, -16%, and +4%, respectively. The revenue structure of various industries is relatively balanced. Among them:

1) The operator and financial industries have achieved steady growth, maintaining the company's consistent advantages in the above two industries.

2) In the energy and enterprise sector, the decline in the company's revenue was mainly affected by a single major project in the same period last year, and breakthroughs were achieved in the field of innovative solutions in industry segments such as car companies and tobacco.

3) In the government, public institutions and other fields, the company achieved positive growth despite prudent overall budgets, achieved rapid breakthroughs in transportation, emergency and other industries, and won bids for projects to improve emergency warning and command capabilities in many places.

By business: The company's safety products and security services achieved revenue of 0.419 and 0.339 billion yuan respectively, +17% and 25%, respectively, and the gross margin of both business companies achieved significant increases (+5.34 and 5.64pct, respectively). We believe that it mainly benefited from the company's strategic adjustments, removal and elimination of products and services with poor economic efficiency, focusing on the company's key products and strategic direction.

Promote cost reduction and efficiency, and accelerate profit recovery

The company actively promotes quality and efficiency, and the cost control effect is obvious. The total three fees for 24H1 company decreased by 7.47% year on year. Among them, the total three fees for a single quarter of 24Q2 fell 11.76% year on year, further contributing to the improvement of profit side loss reduction.

In terms of cash flow, the net cash flow from the company's 24H1 operating activities was 0.042 billion yuan, an increase of 116.85% over the previous year. For the first time since 2022, net operating cash inflow was achieved in the first half of the year.

Profit forecasting and valuation

Considering the sharp decline in the company's 2023 performance, we lowered our previous profit forecast. We forecast the company's operating income for 2024-2026 to be 1.911, 2.176, and 2.486 billion yuan, respectively, and net profit to mother of -0.338, 0.009, and 0.158 billion yuan, respectively. Despite the pressure on the company's short-term performance, considering that the company continues to improve the distribution structure, strengthen employee incentives, and improve quality and efficiency through platform empowerment and instrumentation, we are still optimistic about the development of the safety industry and the restoration and implementation of the company's performance in the long term, and maintain a “buy” rating.

Risk warning: Downstream customer budget recovery falls short of expectations; gross margin continues to fluctuate due to changes in revenue structure, new product development and implementation falls short of expectations, and industry competition intensifies.