Incident: The company's 2024H1 revenue was 0.794 billion yuan, +7.40% YoY, net profit to mother 0.234 billion yuan, +23.18% YoY; 2024Q2 revenue 0.409 billion yuan, +4.20% YoY; and net profit to mother 0.157 billion yuan, +11.22% YoY.

Cash payouts have slowed, and AI penetration has further increased. 2024H1 China Manufacturing Network's business revenue was 0.649 billion yuan, +7.09% year over year, and cash payments were +6.43% year over year. The slowdown in growth was related to management changes, organizational structure adjustments, and a high base. In March, the company split the original division into two separate divisions, operation and sales. The management is more refined, which is expected to further enhance the service experience and market share of the Made in China network. As of 2024H1, the number of paid members on the Made in China platform was 25,734, an increase of 716 over the end of 2024Q1. The AI business 2024H1 had revenue of 11.3008 million yuan, cash payback over 13 million yuan, and 6,095 AI members, an increase of 1,454 from the end of 2024Q1. The AI division is also independent from the original China Manufacturing Network Division. In the future, it is expected to break through the limitations of usage scenarios of the Chinese manufacturing network and expand the range of users using technical advantages. Cross-border/insurance business 2024H1 revenue was 45.6843/55.4919 million yuan, +8.76%/-5.37% YoY.

The gross margin has increased, and the cost control effect is remarkable. 2024H1's gross margin was 80.17%, +1.76 pct year on year. Mainly, the gross margin of China's manufacturing network business increased. The sales/management/R&D/finance cost ratios were 35.26%/9.47%/10.12%/-2.89%, respectively, -2.00/+0.57/-0.80/-0.40pct, respectively, with remarkable cost control effects.

Investment advice: China's manufacturing network business is growing steadily. The company pioneered the launch of the AI assistant Michael for foreign trade B2B vertical scenarios in the industry, further strengthening its platform advantages. We expect the company's net profit to be 0.481/0.586/0.704 billion yuan in 2024-2026, corresponding to PE16.0/13.2/10.9X, maintaining an “incremental” rating.

Risk warning: AI product iteration results fall short of expectations, foreign trade exports fall short of expectations, and industry competition intensifies.