Incident: On the evening of August 26, the company released the “2024 Semi-Annual Report”. 24H1 achieved operating income of 2.667 billion yuan (yoy +30.50%), achieved net profit of 1.36 billion yuan (yoy +32.13%), and realized net profit of 1.253 billion yuan (yoy +38.62%) and EPS 1.08 yuan (yoy +32.06%).

Downstream demand continues the trend of marginal improvement, the company continues to improve enterprise communication solutions, and its performance has grown well. 24H1 achieved operating income of 2.667 billion yuan (yoy +30.50%), net profit of 1.36 billion yuan (yoy +32.13%), and net profit of non-return to mother of 1.253 billion yuan (yoy +38.62%). 24H1 downstream demand continues the trend of marginal improvement. The company continuously improves enterprise communication solutions and makes every effort to expand sales channels. All product lines maintain a steady pace of progress, and performance continues to be further consolidated in a positive trend. Looking at a single quarter, 24Q2 achieved revenue of 1.503 billion yuan (yoy +30.16%) and net profit to mother of 0.792 billion yuan (yoy +30.51%).

The 24H1 VCS performed well, and desktop communication terminals were affected by downstream inventory replenishment to achieve rapid growth. 1) Conference products: 24H1 revenue of 0.95 billion yuan (yoy +51.27%), accounting for 35.64% of revenue (yoy+4.90pct). Overseas orders are still the main contributor to growth. The current market share still has a lot of room to improve. The company will continue to strengthen product competitiveness and is expected to maintain rapid growth throughout the year. 2) Desktop communication terminals: 24H1 revenue of 1.51 billion yuan (yoy +20.26%), accounting for 56.61% of revenue (yoy+5.18pct). We expect that there will be some short-term channel replenishment impact. Subsequent companies will continue to consolidate the competitive advantage of the industry and strengthen their market position. 3) Cloud office terminals: 24H1's revenue is 0.2 billion yuan (yoy +29.29%), accounting for 7.51% (yoy+0.07pct). The company's business headset products are still in the early stages of B-side market channel development. In the future, the company will continue to expand its business headset product line to save momentum for long-term development.

Relying on a wholly-owned subsidiary in Singapore, we improve the global marketing and supply chain system. In September 2023, the company announced the establishment of a wholly-owned subsidiary in Singapore with 10 million US dollars of its own capital. On the one hand, it will be the company's second headquarters for international operations to help the company improve its overseas marketing and supply chain system to better meet the needs of high-end market customers; on the other hand, it will also help the company respond positively to changes in the international situation, prevent local market trade risks, and enhance the company's resilience to risks.

Profitability continues to increase, and gross margins of phones and VCS are steadily increasing. 24H1 achieved a gross margin level of 65.25% (yoy+0.04pct) and a net margin level of 51.00% (yoy+0.63pct), and its profitability continued to increase. By product, desktop communication terminals achieved a gross profit margin of 66.93% (yoy+0.14pct) and conference products achieved a gross profit margin of 65.06% (yoy+0.07pct). The company continues to strengthen product competitiveness, relying on technology research and software iteration to help the gross margin of key products increase steadily.

Remarkable results in cost reduction and efficiency have been achieved, and high R&D investment has been maintained for a long time to promote product innovation. 24H1's four expense ratios are 12.57% (yoy-3.48pct), of which sales expenses ratio is 4.56% (yoy-1.01pct) and management expenses ratio 2.24% (yoy-0.24pct). 24H1 R&D expenses reached 0.197 billion yuan (yoy +1.63%), and continued to maintain high R&D investment. 24H2 will launch new products such as next-generation smart conference terminals such as professional audio and video conference tablets, business headsets, etc., and continue to promote software-side updates and iterations to provide a driving force for the company's sustainable development through product and technological innovation.

Operating cash flow performance is good, and overall orders are strong. 1) Operating cash flow: 24H1 was 1.113 billion yuan (yoy +67.68%), mainly due to the increase in the company's business revenue. 2) Inventory: 24H1 balance is 0.697 billion yuan (yoy +8.22%); 3) Accounts receivable: 24H1 is 1.043 billion yuan (yoy +11.71%).

We attach great importance to shareholder returns, and the 24H1 mid-term dividend rate reached 56%. 24H1 plans to distribute a cash dividend of 6 yuan for every 10 shares to all shareholders, with a total dividend of 0.757 billion yuan, with a dividend rate of 55.69% (23H1 dividend ratio 61.31%, year-end dividend ratio 56.52%). In the future, the company will increase its cash dividends while ensuring long-term development and share the company's business development results with investors.

Investment advice: The company's net profit due to mother in 2024-2026 is estimated to be 2.5 billion yuan, 3.033 billion yuan, and 3.635 billion yuan, respectively, corresponding to PE of 16.7 times, 13.7 times, and 11.5 times, respectively, maintaining the “increase” rating.

Risk warning: Increased market competition, rising raw material prices, and uncertainty in new product development.