Description of the event

2024H1: Operating income of 21.866 billion yuan, +14.00% YoY; net profit to mother 0.434 billion yuan, +105.71% YoY; net profit without deduction of 0.277 billion yuan, +270.93% YoY.

2024H1: Foreign companies in Beijing that placed assets achieved net profit of 0.437 billion yuan, -13.22% YoY; net profit of 0.28 billion yuan after deducting assets, -7.70% YoY.

2024Q2: Revenue of 11.316 billion yuan, +15% YoY, net profit to mother of 0.223 billion yuan, reversing losses year over year; net profit without deduction of 0.091 billion yuan, -14% YoY.

Incident comments

2024H1, the company's revenue side grew steadily year on year, and the performance growth rate more than doubled. It was mainly due to the performance loss of assets placed before and retained in the same period last year. Among them, land value-added tax and other related taxes and fees generated by assets due to the implementation of major asset restructuring affected profit and loss for the same period last year. In April 2023, the company completed the transfer of the major asset restructuring, the main assets and liabilities related to commodity retail and property business, and replaced 100% of the shares of Beijing foreign enterprises held by Beijing State Administration, Tianjin Rongheng, Beijing Venture Capital, and Beijing Guofa.

By business, 2024H1, the company's business outsourcing, recruitment and flexible employment, personnel management, and compensation and benefits management achieved revenue of 181.27/2.35/0.471/0.54 billion yuan, respectively, +15%/+21%/-12%/-7%, accounting for 83%/11%/2%/2%/2%, respectively, and gross margins of 2.88%/2.25%/79.22%/17.24%, respectively.

2024Q2, double-digit year-on-year growth on the revenue side and a decline in gross margin led to a year-on-year decline on the performance side. In the second quarter, the company's revenue was +15% year over year, and gross margin fell 1.23 pct year on year. It is expected to be related to the rapid growth of outsourcing business with low gross margin. Although sales, management, and R&D expenses rates were -0.02/-0.53/-0.33pct year on year, combined with other earnings represented by government support funds, increased the company's performance-side resilience to a certain extent, but net profit without going back still fell 14% year on year.

Looking ahead to the future market, I am optimistic that the company will adhere to the strategic development direction of “marketization, specialization, digitalization and internationalization”, make full use of its deep professional service capabilities, unique ecological resource advantages and rich data asset value, and fully implement the strategic plan of “product innovation, data empowerment, ecological links, and national collaboration” to reduce costs and increase efficiency in a contrarian environment to achieve steady improvement in performance.

Profit forecast and investment advice: The company's net profit due to mother in 2024-2026 is expected to be 0.835/0.894/1.002 billion yuan, respectively, and the corresponding PE is 9.19/8.59/7.66X, respectively, maintaining a “buy” rating.

Risk warning

1. The macroeconomic environment is complex, and the risk that customer demand is growing less than expected; 2. The pace of promotion of fund-raising projects and the risk that the return on investment falls short of expectations; 3. Increased competition will trigger a price war and the risk that the company's profitability will decline; 4. The pace of government subsidy disbursement falls short of expectations, which may affect performance errors.