Net profit of 24H1 fell 16.47% year on year. Maintaining the “buy” rating, China Haiphong released a semi-annual report. In 2024, H1 achieved revenue of 1.158 billion yuan (yoy -14.57%) and net profit of 75.3704 million yuan (yoy -16.47%). Among them, Q2 achieved revenue of 0.799 billion yuan (yoy -12.95%, qoq +123.11%) and net profit to mother of 71.4602 million yuan (yoy -4.32%, qoq +1727.53%). We expect the company's 2024-2026 EPS to be 0.49, 0.66, and 0.84 yuan respectively (the previous value was 0.55, 0.72, and 0.90 yuan in 2024-2026). The reason for the reduction was that downstream customer demand fell short of expectations. Comparatively, the company Wind agreed to expect an average PE value of 49 times in 24, giving the company 49 times PE in 24, with a target price of 24.01 yuan (previous value of 26.4 yuan), maintaining a “buy” rating.

A number of business revenues declined due to market factors, and overall gross margin increased. In the first half of the year, the company was affected by factors such as fluctuations in downstream market procurement plans, and overall operations were under certain pressure.

Among them, electronic information products achieved revenue of 0.587 billion yuan, a year-on-year decrease of 8.17%; hydroacoustic electronic defense business achieved revenue of 0.321 billion yuan, a year-on-year decrease of 21.82%; specialty electronics achieved revenue of 0.21 billion yuan, a year-on-year decrease of 25.32%; and professional technical services and other business revenue of 15.7 million yuan, an increase of 44.49% year on year. In terms of gross margin, the gross margin of electronic information products was 35.80%, up 4.51 pct; the gross margin of the hydroacoustic electronic defense business was 38.96%, up 7.53pct year on year; the gross margin of the specialty electronics business was 33.05%, down 3.43 pct year on year; and the gross margin of professional technical services and other products was 16.15%, down 5.3 pct year on year. The company's overall gross margin was 36.46%, up 3.95pct year-on-year.

Expense ratios have increased during the period, and operating cash flow has improved

The company's expense ratio for the first half of the year was 28.75%, an increase of 2.71 pct over the same period last year. Among them, the sales fee ratio was 4.53%, up 0.49 pct from the same period last year; the management fee ratio was 12.13%, up 1.43 pct; and R&D expenses were 12.04%, up 0.75 pct year on year. The company accrued a credit impairment loss of 23.11 million yuan in the first half of the year, compared to 25.36 million yuan in the same period last year. Net operating cash flow was -40.61 million yuan, compared to -0.239 billion yuan for the same period last year. The company's inventory in the first half of the year was 1.861 billion yuan, up 15.99% year on year; contract debt was 0.16 billion yuan, up 82.45% year on year, indicating that the company's downstream demand is recovering.

New technology continues to break through, and the direction of “car road cloud” is progressing smoothly

In the first half of the year, the company transformed from a single equipment mindset to a system mindset, and achieved new breakthroughs in various directions such as vector technology, large-scale array technology, and some core algorithms in the field of hydroacoustic defense; in the direction of special electronics, a breakthrough was made in the commercialization of a certain type of ultra-micro servo driver product; in addition, the company developed 6 new customers in the field of intelligent transportation, and became a member unit of the “Vehicle Road Cloud Future Transportation Technology Joint Laboratory” under the Shanghai Smart Vehicle Integration Innovation Center, and participated deeply in the “Vehicle Road Cloud Integration” system design for the future Integrated development has laid a solid foundation.

Risk warning: Product quality and production safety risks, operational management risks caused by many subsidiaries.