Incident: The company released the “2024 Semi-Annual Report” on the evening of August 28. The company achieved operating income of 4.075 billion yuan, up 5.42% year on year; net profit attributable to shareholders of listed companies was 0.333 billion yuan, up 10.17% year on year; and net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 0.316 billion yuan, up 11.45% year on year.

Net operating cash flow improved markedly. In the first half of 2024, the company strengthened the promotion and application of new products in the IoT market segment and close cooperation with industry ecosystem partners to achieve steady growth in revenue and net profit.

Net cash flow from operating activities was $0.338 billion, up 150.87% year over year. The cash flow situation improved significantly, mainly due to the company strengthening accounts receivable while suppliers provided better credit policies.

Selling Ruiling wireless avoids business risks. Global trade disputes and frictions have intensified, and some Ruiling Wireless customers have raised concerns that the company will take steps to eliminate the risks. Therefore, in July, the company announced the sale of Ruiling Wireless's overseas automotive front-mounted wireless communication module business at a price of 0.15 billion US dollars to avoid the risk of significant impairment of goodwill and at the same time return capital, thereby protecting the interests of the company and shareholders to the greatest extent possible. We believe that Guanghetong has responded positively to complex changes in the current international market environment, promptly divested the automotive business, which has relatively high overseas operating risks, effectively avoided business risk, and conforms to the long-term interests of the company and shareholders.

Continuously improve the edge computing power product matrix. The company insists on independent research and development to maintain the company's core competitiveness and market leading position. In the first half of 2024, R&D investment reached 0.388 billion yuan, an increase of 10.78% over the previous year. The company released a number of Linux edge AI solutions based on the Qualcomm platform and Fibot, a real intelligent robot development platform based on Qualcomm's high computing power chips. The company's intelligent module SC126 helps the mowing robot to be commercially launched, and will be widely used in outdoor gardens, home courtyards, public green spaces and other places.

Insist on innovating and developing core business. The company's R&D investment at this stage is mainly in three areas: (1) communication technology:

The company invests heavily in 5G REDCap products and will be the first to be applied in the fields of electricity, video security, and wearables. In addition, the company has related layouts in the fields of satellite communications, V2X vehicle-road collaboration, and low-altitude economy. (2) End-side AI: The company established an intelligent module product line in 2019. In the future, it will increase investment in related R&D and increase its share of revenue. (3) Robotics: The company established an intelligent computing product line in 2023. Currently, smart lawnmowers are used as a breakthrough point to accumulate and reuse technology.

Investment advice: The company is committed to developing an overall edge intelligent computing solution with integrated communication capabilities. The company's excellent strategic choices and refined management capabilities support the company's long-term development, and future development prospects are promising. We expect the company's net profit to be 0.705 billion yuan/0.591 billion/ 0.748 billion yuan respectively in 2024-2026, with corresponding growth rates of 25%/-16%/27%, and corresponding PE 11.8X/14.0X/11.1X, respectively, maintaining a “highly recommended” investment rating.

Risk warning: Market competition increases risk, downstream demand fluctuation risk, global economic and trade friction risk.