The new intelligent strategy paid off. We are optimistic about annual performance growth, and maintain the “purchase” of Neusoft Group 24H1 to achieve revenue of 4.299 billion yuan (yoy +10.52%), net profit of 98.2827 million yuan (yoy +3.39%), deducting non-net profit of 40.2687 million yuan (yoy +28.67%). Among them, Q2 achieved revenue of 2.469 billion yuan (yoy +10.53%) and net profit of 93.0301 million yuan (yoy +3.36%) to mother.

Benefiting from the new intelligent strategy, the company's revenue grew steadily, profitability improved, and profit forecasts were maintained. The company's net profit for 24-26 is estimated to be 0.362/0.515/0.647 billion yuan, respectively. Using segmented valuation, the net profit for 24E smart cars is 0.188 billion yuan, and the net profit for other businesses is 0.174 billion yuan. Refer to the comparable company's smart car/other business 35.2x/21.8x 24PE, and consider the company's strategic transformation advantages, and give smart cars/other businesses 40x/30x 24PE respectively, with a target price of 10.58 yuan (previous value of 10.49 yuan) to maintain “purchase”.

The gross margin of each business increased across the board, and the cash flow from operating activities was significantly optimized. The company's 24H1 gross sales margin was 30.37%, an increase of 0.77 pct over the previous year. By business, the gross margins of healthcare and social security, smart car connectivity, smart city, enterprise connectivity, and other businesses were 47.25%/16.22%/41.42%/34.66%, respectively, up 0.30, 0.21, 3.90, and 0.71 pct year-on-year, respectively, and gross margins of each business were fully optimized. 24H1's sales/management/R&D expenses rates were 5.27%/8.52%/10.34%, respectively, -0.97pct/+1.03pct/-1.24pct, respectively, and the cost rate was effectively controlled during the period. 24H1's net operating cash flow was -0.183 billion yuan, +65.02% year-on-year.

Guided by a new intelligent strategy to build a common technology foundation, the core business accelerated growth. The company launched a new intelligent strategy in 24, strengthened company-level common basic technology research and development represented by AI and big data, and achieved accelerated growth in the core business. 1) AI intelligence: The company uses the Magical Science and Technology Research Institute as the main engine to comprehensively promote the intelligent solution. As of 24H1, it has implemented technology implementation in scenarios such as medical treatment (medical records, medical insurance, medical imaging), government (human society), smart cars, etc.; 2) Data valorization: focusing on medical treatment, government data value release, 24H1 has completed the construction of projects such as the Fujian Three Medical Big Data Empowers Commercial Insurance Dual-Core Operation Service and Changzhou Hyperintegrated Big Data Platform; on the basis of data companies in Shenyang, Jinzhou and other places put into operation Big data groups in many provinces and cities such as Taizhou and Changzhou Reach strategic cooperation to jointly create a new service model of “data elements x healthcare/smart city”.

Automobile overseas continues to grow rapidly. We are optimistic that the “car-road-cloud” incremental market 24H1's automobile overseas business will grow rapidly. The additional fixed amount added to the overseas business increased 70% year-on-year, and overall shipments increased by more than 50%. Among them, shipments of Nagivi cockpit software products increased by about 150%. The company currently has deep cooperation with the TOP5 car manufacturers exporting to Europe for their mainstream overseas models, and has become one of the largest suppliers for overseas customers of Chinese car manufacturers. At the same time, the company actively lays out the “car-road-cloud” incremental market, has participated deeply in the 2.0 and 3.0 phase construction of the Beijing High-Level Autonomous Driving Demonstration Zone project, and is actively preparing bids related to Beijing's 4.0 phase construction and the integrated construction of the vehicle road cloud in other pilot cities. The company's 5G V2X Box products are ready for large-scale mass production.

Risk warning: The progress of the intelligent driving industry fell short of expectations; the subsidiary's business dragged down beyond expectations.