Incidents:

The company released its 2024 semi-annual report: the company's revenue for the first half year of 2024 was 0.307 billion yuan, a year-on-year decrease of 1.24%; net profit attributed/withheld from mother was 0.008/-0.018 billion yuan, respectively, a year-on-year decrease of 83.40% /profit turned into a loss. Among them, in the Q2 single quarter, the company achieved revenue of 0.156 billion yuan, an increase of 1.09% year on year; net profit attributed/withheld from mother was 0.001/-0.012 billion yuan, respectively, down 94.16%/210.73% year on year.

Self-developed core technology platforms supported revenue, and Endurance Electronics achieved rapid development. Q1-Q2 companies achieved revenue of 0.151/0.156 billion yuan respectively in 2024, with year-on-year changes of -3.54%/+1.09%, respectively. In terms of driving factors, the 2024H1 accounted for 77.97% of sales of digital oscilloscope products equipped with the company's self-developed core technology platform, an increase of 5.09pct over the previous year. Of these, 2024Q2 accounted for 83.06%, an increase of 10.30 percentage points over Q1. In addition, as of the end of May 2024, it is expected that orders in progress will be accepted at 0.069 billion yuan this year, with the ability to continuously obtain orders, which can provide a strong guarantee for the sustainability of its business. 2024H1 Endurance Electronics's revenue increased by 748.44% year-on-year.

Gross margin is on an upward channel. In terms of profitability due to exchange gains and losses and interest on short-term loans, the 2024H1 company's gross margin/net profit margin to mother was 56.67%/2.49%, respectively, with a year-on-year change of +1.06/-12.32 pcts. In terms of period expenses, 2024Q2's sales/management/finance rates were 19.08%/16.54%/3.06%, respectively, up 0.72/5.08/6.34pct year-on-year, respectively. Among them, changes in financial expenses were mainly due to exchange gains and losses due to exchange rate fluctuations and increased interest expenses on short-term loans.

The company's R&D rate during the same period was 28.74%, an increase of 6.33pct over the same period, providing a guarantee for the company's core competitiveness.

The launch of new products helped increase performance, and equity incentives showed confidence in long-term development. The DS80000 series high-bandwidth real-time digital oscilloscope released by the company in 2023 is a key product promoted this year. The annual sales revenue is expected to reach tens of millions of yuan, and its ability to replace foreign products has been recognized by major core customers. The DHO5000 series high-resolution digital oscilloscope and DG5000Pro series function/arbitrary waveform generator released in August 2024 are expected to have a positive effect on improving the company's business performance in the second half of the year. In addition, the company issued an equity incentive draft in April. The trigger values for 2024/2025 were all current year's revenue up 15% year over year or net profit increased 10% year over year; the target values were all current year's revenue up 30% over the previous year or net profit increased 20% year over year, demonstrating the company's confidence in long-term growth.

Investment advice and profit forecasting

The company is a scarce target with self-developed chipsets with digital oscilloscopes, and is expected to enter a continuous upward channel for profit. We are optimistic about the company's long-term development. We expect the company to achieve revenue of 0.773/0.938/1.144 billion yuan in 2024-2026, net profit to mother of 0.109/0.145/0.192 billion yuan, EPS of 0.57/0.75/1.00 yuan, corresponding PE of 43.81/32.99/24.94 times, maintaining a “buy” rating.

Risk warning

Risk of loss of technical personnel, risk of market competition, risk of performance falling short of expectations, risk of iterative product upgrades