The company announced 2024H1 results:

Q2: Revenue of 0.64 billion (+3.6%), net profit attributable to mother -0.034 billion (-154.9%); net profit after deducting non-return to mother 0.013 billion (-71.8%)

H1: Revenue 1.08 billion (+0.8%), net profit attributable to mother 0.011 billion (-85.4%); net profit after deducting non-return to mother 0.013 billion (-60.6%)

The main reason for the difference between net profit not attributable to mother and net profit attributable to mother was the divestment of GDC, and its loss of 37.35 million was not included; if GDC was not affected by arbitration fees, the company's Q2 net profit was 0.019 billion (-70%), which was not 0.028 billion (-39%).

Revenue analysis: vehicle side volume, B-side stability, C-side adjustment

Vehicle: H1's revenue began to grow at 0.24 billion, of which Q1/Q2 revenue was 0.05/0.19 billion, and the company held 7 fixed points, including 2 Q1 models, 1 BAIC New Energy, 2 BYD, Huayu Vision, and the Mercedes-Benz Smart Genie #5 concept car. Up to now, the Quanjie M9 has broken through 0.12 million units, and the Enjoy S9 will enter the delivery period in August.

Cinemas: H1's revenue was 0.27 billion, of which Q1/Q2 was 0.15 billion/0.12 billion, respectively. Affected by the movie market, Q2 weakened month-on-month. The subsidiary Zhongying Guangfeng's revenue remained flat, with a net interest rate of 21% (+2pct), and the quality of operations was improving.

B-side professionals showed that H1 revenue of 0.2 billion remained the same year on year, of which 0.12 billion yuan (+24%) /business education 0.08 billion yuan (-23%), and cultural tourism orders helped the project recover.

C-end peak meter: H1 revenue of 0.24 billion (-36% year over year), net loss of 48.53 million (year-on-year loss of about 30 million). We expect a slight increase in revenue related to Xiaomi and a double-digit decline in independent brand management strategy adjustments.

Devices and others: H1 is expected to decline in double digits, and light sources and optical machines will be affected by the terminal boom.

Profit analysis: vehicle-mounted climbing increases control fees

Gross profit margin: The gross profit margin in Q2 was 30.4%, -9.4pct year over year. The gross margin was still climbing due to the increase in vehicle share, and the C-side accelerated inventory clean-up.

Net interest rate: Excluding the impact of GDC, the net interest rate for Q2 was 2.9%, -7.1pct year on year, and sales/management/R&D/finance was -4.9/-0.5/-1.2/+2.9pct year on year, respectively. In addition to the increase in financial expenses due to exchange, the actual cost ratio has improved significantly year over year, and significant optimization has been achieved in terms of operating quality.

Investment advice: keep buying

Our point of view:

The company is at an important point where the second-line vehicle curve is accelerating. B-side fundamentals are steady and the quality of operation is steadily improving, the C-side historical burden is being cleared at an accelerated pace, and performance flexibility can be expected.

Profit forecast: We expect the company's revenue for 2024-2026 to be 2.4/3/3.6 billion yuan, +9%/+23%/+22%, net profit to mother 0.1/0.2/0.28 billion yuan, -4%/+102%/+39%; corresponding to PE 70/35/25X, maintaining a “buy” rating.

Risk warning:

Vehicles fall short of expectations, the downstream economy fluctuates, and there is a risk that raw material prices will fluctuate greatly.