The company released its 2024 semi-annual report

The company's 24Q2 revenue was 0.15 billion yuan, and net profit to mother was 0.04 billion yuan, or -57.3% year-on-year, minus 0.04 billion yuan without return to mother, or -56.6% year-on-year;

24H1's revenue was 0.26 billion, -14.7% YoY, net profit to mother 0.04 billion, or -51.6% YoY, before deducting 0.04 billion non-return to mother, or -51.1% YoY. The decline in income was partly due to macroeconomic fluctuations and insufficient effective market demand.

By product, 24H1 standardized test site equipment revenue was 0.17 billion yuan, -24.4%, accounting for 67%; revenue from smart education products and overall solutions was 0.06 billion yuan, +14.4%, accounting for 21.8%.

The company's 24H1 gross profit margin was 54.9%, +1.8pct year on year; net profit margin to mother was 16.4%, -12.5pct year on year.

By product, the gross profit margin of 24H1 standardized test site equipment was 60.2%, +2.9 pct year on year; the gross profit margin of smart education products and overall solutions was 43.9%, +1.1 pct year on year.

On the cost side, the company's 24H1 sales/management/ R&D/ finance expenses ratio was 14.1%/16.6%/8.9%/-2.7%, respectively, +3.4pct/+9.1pct/+1.9pct/+0.1pct. Among them, management expenses were 0.04 billion, +89.6% year-on-year, mainly due to amortization of employee stock ownership plan expenses.

Keep up with market changes, adjust strategies in a timely manner, and strive to achieve annual targets in the first half of '24. Facing a complex and changing market and macroeconomy, some of the company's projects fell short of expectations. The company closely followed market changes, adjusted its market strategy in a timely manner, successfully completed the construction and service of large-scale smart tests in many parts of the country; and promptly promoted new business models such as integration of rental and construction and collection of service fees.

During this year's college entrance examination period, the company fully responded to the requirements of “actively promoting real-time intelligent inspection of college entrance examination halls and real-time intelligent inspection of confidential rooms” put forward by admissions examination institutions at all levels. Relying on an online inspection system, AI was used to analyze examination irregularities and abnormal behavior to achieve real-time inspection of examination rooms and real-time alarms for candidate irregularities, etc., to comprehensively improve the efficiency of examination management. By the end of June '24, the company's intelligent inspection products had supported users to carry out intelligent inspection site work in more than 20 provinces and cities, laying a solid foundation for subsequent large-scale market expansion.

New business breakthroughs have been achieved, and the “AI+” strategy is progressing steadily

Using the advantages of 5G+ cloud networks, combined with advanced technologies such as AI machine vision recognition and big data, the company provided physical education AI solutions for physical education based on camera and various terminal support, sports education AI solutions for physical education, training, testing, events and evaluation, and sports atmosphere creation.

In the 2024 National Junior High School Sports Examination, Jiafa Education's “AI New Physical Examination” program was applied to more than 300 test sites across the country, providing professional sports examination support for 0.5 million+ candidates. The cumulative number of tests exceeded 8 million. The company quickly implemented the “A I+” strategy and steadily promoted the autonomy and control of core technology.

On the one hand, the company's self-developed education model capabilities continue to improve, and the self-developed “Linggu Text Generation Big Model Algorithm” successfully passed the National Internet Information Office's algorithm filing and certification; on the other hand, the company's many AI products and application scenarios have been implemented, and at the same time, the entire core technology chain is autonomous and controllable.

Adjust profit forecasts to maintain “buy” ratings

In the context of the development of digitization and intelligence in education, Jiafa Education focuses on the two major business directions of smart testing and smart education. Based on its own core products and implementation service capabilities, it deeply integrates advanced technology and business awareness, and launches comprehensive solutions covering various tests and K12 and higher education vocational education teaching scenarios. It serves 31 provinces (municipalities directly under the Central Government and autonomous regions) across the country, and is used in thousands of education management institutions and tens of thousands of schools.

Based on the company's 24H1 performance, both the company's revenue and net profit to mother declined sharply. At the same time, considering the economic situation and market environment, we adjusted the profit forecast. We expect the return home for 24-26 to be 0.14/0.18/0.25 billion yuan respectively (the previous 24-26 year value was 0.19/0.28/0.36 billion yuan), EPS was 0.34/0.46/0.62 yuan/share, respectively, and the corresponding PE was 24/18/13X, respectively.

Risk warning: risk of delayed implementation of policies, risk of high industry dependency, risk of gross margin fluctuation, management risk, technical risk, etc.