Investment events: The company released its 2024 semi-annual report: revenue for the first half of 2024 was 1.574 billion yuan, up 3.42% year on year; net profit to mother - 0.182 billion yuan, down 198.60% year on year; net profit after deducting non-return to mother - 0.1 billion yuan, down 24.36% year on year.

Revenue continues to grow steadily, and efforts continue to be made in the emerging security sector. Revenue for the first half of 2024 was 1.574 billion yuan, up 3.42% year over year. New orders grew rapidly in the first half of the year, and collaborative revenue with China Mobile continued to grow rapidly.

In the first half of 2024, the company's emerging security business segment continued to show innovative results. Among them, the revenue of the cloud-related security segment increased by more than 200% over the same period last year. By product, revenue from cloud security, identity trust products, 5G+ industrial Internet security testing products, and IoT security access protection products increased by more than 150% over the same period last year.

Gross profit margin increased month-on-month, and cost management was strengthened. The gross margin of the 2024 Q2 Company was 64.59%, an increase of 13 over the previous month.

77 pcts The profit side was under pressure in the first half of 2024. Net profit attributable to mother was 0.182 billion yuan, down 198.60% year on year; net profit without return to mother was 0.1 billion yuan, down 24.36% year on year. The main reason for the decline in net profit attributable to mother was a decrease in current investment income and return on changes in fair value. The total three fees for 2024H1 companies decreased by 2.69% year on year; further strengthened repayment management, 2024H1 repayment increased 13.69% year over year, accounts receivable balance continued to decline compared to the beginning of the period, and sufficient capital holdings were sufficient, which is conducive to the healthy and sustainable development of the company. The company increased R&D investment in the direction of strategic innovation, and the total investment in 2024H1 R&D increased by 5.54% year-on-year.

Comprehensive layout of the BASIC6+X field. In January 2024, the company was officially controlled by China Mobile and entered a new stage of development. Internally support the construction of China Mobile's network communication security capability system, and externally collaborate with China Mobile's advantages in networks, big data, artificial intelligence, etc., to strategically lay out the construction of a large Internet communication security sector, and work with China Mobile to build a new large-scale Internet communication security sector. In the field of BASIC6+X, the company: 1) vigorously promotes the “AI+” action plan, concentrates on building an AI security model and scenario-based application, and officially releases the “Nine Days Taihe Security Model” in May 2024; 2) The company continues to consolidate the cloud-related security technology base and cloud-native security application capabilities, covering infrastructure, platforms, and data to applications to fully ensure cloud environment security and compliance; 3) Further implement the “data oasis” strategy and focus on building a data element security system with full integration of security and data elements; 4) Continuing efforts to integrate security and data elements Secure operations, including cloud-hosted standardized security operations and on-site major customer security operations. In the X Strategy emerging industry scenario, the company comprehensively built a new industrial safety capability system, and released the “New Industrialized Safety Capability System (2+2+1+X)” with a strategic layout and a new industrial safety capability system.

Investment advice: Considering that the current macroeconomic recovery falls short of expectations, we adjusted the company's profit forecast. The company's total revenue for 2024-2026 is 5.194, 6.156, and 7.256 billion yuan, respectively (the previous forecast values were 52.92, 63.87, and 76.

8.7 billion yuan); net profit to mother was 0.792, 0.984, and 1.222 billion yuan (previously predicted values were 0.929, 1.196, 1.449 billion yuan). The company's 2024/2025/2026 EPS was 0.83/1.03/1.28 yuan respectively (the previous forecast value was 0.97/1.26/1.52 yuan for 2024/2025 EPS), giving it a “buy” rating.

Risk warning: Economic recovery falls short of expectations, operator risk, technology change risk, business development falls short of expectations, seasonal sales risk, increased competition in the information security industry, policy risks