Incident: On August 28, the company released its 2024 mid-year report. In the first half of 2024, the company achieved operating income of 0.156 billion yuan, a year-on-year decrease of 21.41%, and realized a net profit of 0.025 billion yuan to mother, a year-on-year decrease of 36.56%.
Continue to insist on R&D and innovation, and actively explore overseas markets. In the first half of 2024, due to issues such as international trade frictions still existing, the company's performance was under pressure. Operating income was 0.156 billion yuan, a decrease of 21.41% year on year. Mainly affected by the complex economic environment and fluctuations in downstream demand, the company's solution business order volume decreased year on year in the first half of the year; realized net profit of 0.025 billion yuan to mother, a decrease of 36.56% year on year. However, judging from the company's gross margin, it achieved a steady increase in the first half of 2024. The gross margin was 63.48%, an increase of 9.08pct over the previous year. On the cost side, the company's cost rate during the period was 55.35%, an increase of 19.08pct over the previous year, mainly due to the continuous increase in R&D expenses. In the first half of 2024, the company incurred R&D expenses of 33.4538 million yuan, an increase of 21.66% over the previous year; R&D investment accounted for about 21.39% of revenue, an increase of 7.57 pcts over the previous year.
During the reporting period, the company implemented multiple product R&D iterations such as data acquisition gateways, TSN rail 10 gigabit industrial Ethernet switches, and rack-mounted edge computing gateways. At the same time, the company successfully achieved a strategic transformation from a single communications product provider to an end-to-end full-stack product solution enterprise. In addition, the company actively explores foreign markets, continues to increase overseas marketing efforts, and participated in many overseas conferences and exhibitions in the first half of 2024 to enhance brand awareness. The company's overseas business revenue reached 10.3863 million yuan, and initial results have been achieved in Europe and Southeast Asia.
Deeply cultivate the industrial communication market and achieve comprehensive development of markets, products and solutions. The company continues to focus on industrial communication market opportunities, and has built a full-stack industrial Internet overall solution, end-to-end TSN solution, industrial digitization solution, and industrial security solution based on new technologies and products such as industrial networks, TSN, collection of the Internet of Things, artificial intelligence, and industrial safety.
In terms of industrial digitalization technology innovation, the company launched six software and hardware integrated series products, including data acquisition equipment, industrial network equipment, edge computing equipment, industrial control equipment, industrial safety equipment, and digital software, and built the industry's first fully self-developed industrial end-to-end digital infrastructure infrastructure. By industry, the company continues to make efforts in smart mining, electricity and new energy, energy storage, intelligent manufacturing, rail transit, and digital cities. In the first half of 2024, the smart energy/smart transportation/industrial internet/smart city/ other industry sectors achieved revenue of 8,218.82/3,048.00/14.6594/9.4409/19.6147 million yuan respectively, of which the smart energy sector achieved a year-on-year increase of 24.06%. In terms of product structure, the company's industrial switching products/industrial gateways and wireless products/other products achieved revenue of 12,391.39/2,780.01/4.6692 million yuan respectively, of which industrial gateways and wireless products achieved a year-on-year increase of 25.74%. We believe that future performance is expected to improve as the company continues to deepen various application fields of industrial communication and at the same time continuously increases R&D investment to help iterate and innovate products.
Profit forecast and investment rating: The company's net profit for 2024-2026 is expected to be 0.125/0.163/0.202 billion yuan, respectively, and the current stock price is 17/13/10 times PE, respectively. As a rising star in the domestic industrial communications field, the company focuses on building integrated solutions for industrial platforms. We continue to be optimistic about the company's future performance development and maintain a “buy” rating.
Risk warning: Customer growth falls short of expectations, downstream demand falls short of expectations, risk of fluctuations in raw material prices, risk of macroeconomic fluctuations.