Incident: The company issued an announcement on September 5 stating that Ziguang International, a wholly-owned subsidiary of the company, has completed the work related to the delivery of the underlying assets agreed in the “Share Purchase Agreement” with H3C Holdings Limited and Izar Holding Co., Ltd., Ziguang International has paid transaction consideration to the counterparty, and that the transaction has been settled.

Both parties to the transaction have completed the transfer of 30% of H3C shares, and the company's shareholding ratio in H3C has increased from 51% to 81%. According to the company's announcement, Ziguang International, a wholly-owned subsidiary of the company, has completed the asset delivery of 30% of H3C's shares with H3C Holdings Limited and Izar Holding Co., and Ziguang International has paid consideration to the counterparty (transaction price is 2.143 billion US dollars, about 15.177 billion yuan, of which Ziguang International loans do not exceed 9.5 billion yuan, with a total loan period of 7 years). Currently, the company is in the process of changing the H3C shareholder register. After the transaction is completed, the company's holding of H3C shares will increase from 51% to 81%. This transaction will further enhance the company's decision-making efficiency and enhance the company's operational flexibility, help invest more resources and capital in R&D, expand a wider range of domestic and foreign markets, and continuously enhance the company's core competitiveness.

H3C 24H1's revenue continues to grow and will increase the profits of listed companies in the future. 24H1 H3C achieved revenue of 26.428 billion yuan (yoy +5.75%) and achieved net profit of 1.82 billion yuan (yoy -0.20%). As the company's shareholding ratio in H3C increases from 51% to 81%, the net profit of listed companies will further increase, opening up room for valuation repair. At the same time, 24H1 H3C's domestic government and enterprise business achieved steady growth (yoy +8.31%), and the independent channel business in the international business maintained a high growth rate (yoy +61.22%). 24H2 As the Internet, government and enterprise customer-side intelligent computing infrastructure requirements continue to be implemented, and operator-side orders continue to be released, H3C's annual revenue and net profit growth rate is expected to increase, helping the company's performance grow.

The AI networking layout has been strengthened across the board, and overseas markets are building a “second curve” of growth at an accelerated pace. 1) Server heterogeneous computing power layout: The company's server product line always adheres to an open and diversified strategy, maintains close cooperation with mainstream domestic GPU manufacturers, and actively verifies diverse heterogeneous computing power products in various industries such as government, finance, and energy. 2) In terms of 400G/800G switches: 24H1 has achieved rapid growth in 400G and above data center switch orders (mainly due to AIDC demand), and is expected to continue to grow at a high rate throughout the year. 3) In terms of inter-card interconnection: The company proposed a layout related to inter-card interconnection in April '24. 4) In terms of overseas markets, 24H1 consolidates its market position in Southeast Asia, the Middle East, Japan, etc., and continues to explore new European markets and undertake key projects in various industries such as government, education, and operators. In the future, the company will focus on increasing both revenue scale and market share, and continuously increasing the share of overseas markets.

Investment advice: Leading domestic ICT sector, “cloud-network-security-storage-terminal” full-stack layout, simultaneous development of government and enterprises+operators+overseas markets, and broad room for subsequent growth. Since the company has yet to release a financial report and not consider the Q4 consolidated statement, the company's net profit for 2024-2026 is estimated to be 2.184 billion yuan, 2.513 billion yuan, and 2.895 billion yuan, respectively, corresponding to PE of 25.0 times, 21.7 times, and 18.8 times, respectively, maintaining the “Highly Recommended” rating.

Risk warning: The digital transformation of the industry falls short of expectations, the development of cloud computing falls short of expectations, and operator investment falls short of expectations.