Incident: Recently, Tonghuashun released its 2024 mid-year report. H1 achieved total operating income of 1.389 billion yuan, -5.51% year over year, and 24.53% month-on-month in Q2; H1 achieved net profit of 0.363 billion yuan, -20.99% year on year, and +149.38% month on month in Q2. The results were basically in line with expectations.

Due to year-on-year pressure on market transactions, C-side demand was relatively under pressure. 2024H1, the company's cash sales of goods and services reached 1.572 billion yuan, -7% year-on-year, which is narrower than the year-on-year growth rate in Q1; the 2024H1 contract debt ratio was +9.70%, reaching 1.202 billion yuan.

The company increased sales and R&D investment, and profit margins declined year-on-year and increased month-on-month. The company's total operating cost was 1.027 billion yuan, +3.83% year-on-year, down from Q1's year-on-year growth rate. Among them, R&D expenses were +5.12% to 0.592 billion yuan, management expenses were +13.26% to 0.114 billion yuan, and sales expenses were +8.78% to 0.242 billion yuan. Mainly, the company concentrated resources to invest in the field of artificial intelligence models, especially in fields such as introducing professionals and building computing power resources, and R&D expenses have increased; in addition, in order to expand market share and increase sales promotion efforts, sales expenses have also increased accordingly. 2024H1's profit margin was -5.12PCT year-on-year and +9.33PCT month-on-month to 26.12%.

Self-developed financial industry model, HiThinkGPT, lays out the AI field on a long-term basis. The company will accelerate the deep integration of existing artificial intelligence product business with large models, and continuously improve the competitiveness of products and services. The company has launched products in various fields such as big model+financial investment, big model+intelligent customer service, big model+intelligent investment and research, big model+code generation, big model+legal consulting, big model+office assistant, and big model+translation.

The company continues to increase research and development of artificial intelligence technology applications, with a particular focus on increasing the integration of technologies related to the big artificial intelligence model with the company's existing products and service systems, providing users with better product and service quality, and further enhancing the competitiveness of the company's products.

Investment advice: The company is a leading Internet financial information service provider in China. It has a relatively significant competitive advantage in terms of products, customer resources, technology, human resources, data resources, brand recognition, management team, etc. Although it will be affected by the short-term slump in market trading, we are optimistic about the company's long-term development prospects.

The company's diluted EPS for 2024, 2025, and 2026 is estimated to be 1.85, 2.03, and 2.15 yuan, respectively, and the corresponding PE is 52.34, 47.58, and 45.09 times, respectively, maintaining a “buy” rating.

Risk warning: Risk of increased friction between China and the US; risk of continued inversion of the China-US spread; geopolitical risk; macroeconomic downside risk; risk of systemic decline in stock market; risk of slowing fund issuance; risk of tightening supervision; risk of declining fund marketing market share.