After excluding share payment fees, profit was achieved in a single quarter in 24Q2, maintaining the “purchase” rating summary, and 24H1 achieved revenue of 0.196 billion yuan (yoy +28.66%), net profit to mother of -40.88 million yuan (0.649 million yuan in the same period last year), deducting non-net profit of 18.96 million yuan (-4.047 million yuan in the same period last year). The losses were mainly due to loss of investment in transactional financial assets, accrued share payment fees, and increased R&D investment. Q2 revenue in a single quarter was 0.114 billion yuan (yoy +29.2%, qoq +39.6%). Excluding the impact of share payments, 24H1 returned to the mother/deducted non-net profit of -27.45 million yuan/-5.536 million yuan, and 24Q2 achieved profit in a single quarter. We expect the company's 24-26 EPS to be -0.10, -0.07, 0.04 yuan. Comparable to the 24-year Wind, the average PS was expected to be 16.3 times. Considering that the company has global competitiveness in international customers, it was given 18.0 times PS in 24, and the target price was 17.19 yuan, and a “purchase” was given.

Design EDA promoted a high increase in tool licensing revenue and actively expanded the domestic market. 24H1's EDA tool licensing business revenue was 0.136 billion yuan, an increase of 46.6%. Among them, EDA revenue from integrated circuit design increased by 90.5%, and revenue from integrated circuit manufacturing EDA increased by 9.5%; revenue from semiconductor device characteristic testing instruments was 0.042 billion yuan, a decrease of 9.8%, with a gross profit margin of 76.7%; and revenue from technology development solutions was 0.017 billion yuan, an increase of 42.7%, with a gross profit margin of 34.6%. The company is actively expanding the domestic market and seizing favorable opportunities for the development of China's EDA industry. 24H1 revenue from domestic sources was 0.133 billion yuan, an increase of 44.0%, accounting for 68.0% of revenue and a gross profit margin of 85.8%; overseas revenue was 0.063 billion yuan, an increase of 5.5%, and a gross profit margin of 96.8%. By channel, 24H1's direct sales revenue was 0.176 billion yuan, with a gross profit margin of 91.5%; distribution revenue was 0.02 billion yuan, with a gross profit margin of 70.2%.

Investment in R&D has increased, and product competitiveness continues to increase

24H1's gross profit margin was 89.0%, up 4.8pct year-on-year, mainly due to changes in the product structure of semiconductor characteristic testing systems and an increase in the share of sales of high-margin products in the current period. Sales/management/R&D expenses rate was 22.54%/15.64%/63.59%, -0.58pct/-2.45pct/+4.00pct year-on-year. The company continued to increase R&D investment, with 24H1 R&D investment of 0.131 billion yuan, an increase of 44.1%, accounting for 66.7% of revenue, +7.2pct; by the end of 24H1, the company had 381 R&D personnel, an increase of 42.2%, accounting for 70.7%, or +5.8pct year on year. The company launched a design platform product, and the entire DTCO manufacturing EDA process for process development and the full design EDA process for memory etc. were basically formed. We believe that as the company continues to increase investment in R&D and continues to iterate products, product competitiveness is expected to continue to increase.

With good platform foundation/integration experience, it is expected that the entire EDA process will be covered gradually. The company has a solid platform foundation, has device modeling and circuit simulation EDA tools that are competitive in the international market in key areas, and has a good foundation for building the whole process of EDA. Furthermore, the company has previously completed the acquisition and successful integration of Boda Micro, Entasys, Xinzhilian, and Magwel. We believe that the company can benefit from strong industry integration capabilities in the long term and gradually cover the entire EDA process.

Risk warning: R&D results fall short of expectations; market competition intensifies.