The company's traditional business is developing steadily. At the same time, it is actively expanding emerging business fields such as digital agriculture, smart energy, and the customer base of central state-owned enterprises. Projects have already been implemented, and new business types such as consulting and innovation have been established to further expand revenue space. Factors such as investment in new business development and exchange losses due to fluctuations in the yen temporarily dragged down profits, and the pressure on the company will gradually decrease in the long run.

Incident: Hirohiko Technology released its 2024 mid-year report. 24H1 achieved operating income of 3.367 billion yuan, YoY +4.76%; realized net profit to mother of 0.075 billion yuan, YoY -45.85%; realized deducted non-net profit of 0.069 billion yuan, YoY -40.94%. Sales/management/R&D expenses were 0.106/0.374/0.155 billion, YoY +6.77%/+7.15%/+7.87%, respectively. Net operating cash flow of -0.289 billion yuan was achieved compared to -0.139 billion yuan in the same period last year. Among them, Q2 achieved revenue of 1.727 billion yuan in a single quarter, YoY +6.10%; realized net profit to mother of 0.055 billion yuan, YoY -23.15%; realized deducted non-net profit of 0.051 billion yuan, YoY -23.16%.

Traditional businesses are developing steadily, and new business directions are being actively expanded. In 24H1, Hiroyan Technology achieved revenue of 1.256/0.872/0.779 billion yuan, YoY +4.21%/+8.44%/+6.17% in the Internet/finance/high-tech industries respectively. The company continues to deepen relationships with existing financial customers while expanding business opportunities in new fields such as AI; in the Internet and high-tech fields, the company optimizes its business and customer structure, maintains steady operation under market changes, and achieves steady development of traditional business. Furthermore, in the business field, the company has expanded into emerging business fields such as digital agriculture, smart energy, and the customer base of central state-owned enterprises, and has realized new business cases such as the “China-ASEAN Smart Farm Integrated Development Plan Thailand Pilot Project” and the North China Electric Power University Industry-University-Research Cooperation. In terms of business type, the company has expanded new business types such as consulting and Xinchuang, actively participated in the construction of the Hongmeng ecosystem, and obtained “Hongmeng Ecological Market Service Provider” and “HarmonyOS Development Service Provider” certifications, further expanding the company's scope of capabilities and revenue space.

The profit side was temporarily under pressure due to the impact of new business expansion and exchange gains and losses. The company achieved a gross profit margin of 24.18% in the first half of the year, an increase of 0.6 pct over the same period last year, and the overall gross profit level was stable. However, the profit side of both 24H1 and Q2 companies declined to a certain extent. On the one hand, due to the year-on-year increase in investment related to the company's new business development, revenue was not fully reflected; on the other hand, exchange assessment losses due to large fluctuations in the yen exchange rate increased year-on-year, reflected in a year-on-year increase in financial expenses of about 47 million yuan and a decrease of about 20 million yuan in government subsidy revenue received in the current period.

Maintain a “Highly Recommended” investment rating. The company's traditional business is developing steadily. At the same time, it is actively expanding emerging business fields such as digital agriculture, smart energy, and the customer base of central state-owned enterprises. Projects have already been implemented, and new business types such as consulting and innovation have been established to further expand revenue space. The company's net profit for 2024-2026 is expected to be 0.221/0.308/0.401 billion yuan, corresponding PE is 22/16/12 times, respectively. Maintain a “Highly Recommended” investment rating.

Risk warning: New business promotion falls short of expectations; R&D progress falls short of expectations; risk of exchange rate fluctuations; risk of macro-environmental fluctuations; geopolitical risk.