Factors such as project delays in the first half of the year dragged down the company's overall performance, but the free trade zone business blossomed, international business advanced comprehensively, and AI began to enable the expansion of product lines and new tracks. The long-term growth foundation was further stabilized, and strong recommendations were maintained.

Event: The company released the 2024 semi-annual report, achieving revenue of 0.633 billion yuan, YoY -21.26%; net profit to mother 0.087 billion yuan, YoY -31.27%; net profit after deducting 0.073 billion yuan, YoY -32.48%; 24Q2 single quarter revenue, net profit to mother, net profit after deducting non-return to mother YoY -13.25%/-42.98%-56.40%.

Factors such as project delays have dragged down the smart port business line performance. In the first half of the year, smart port revenue was 0.494 billion yuan, YoY -30.23%. The decline in revenue was mainly due to delays in the acceptance of some projects. At the same time, due to the impact of the project settlement cycle, repayment of some projects was delayed, and the company calculated depreciation reserves of about 76.47 million yuan for various types of assets, and profit performance was also greatly hampered. However, in the context of the company's active project control and increasing share of self-developed hardware, the gross margin of the smart port business line increased sharply by 5.92 pct year on year, and led to an overall gross margin increase of 1.00 pct year on year.

Free trade zone projects promote high revenue growth in intelligent transportation and other business lines. In the first half of the year, revenue from intelligent transportation and other business lines was 0.135 billion yuan, YoY +47.27%. The main reason was that the company increased the expansion of non-port businesses such as special customs supervision area business and smart terminal business. The Beijing Zhongguancun Comprehensive Free Trade Zone Customs Information Technology Construction Project and the Yangzhou Comprehensive Insurance Zone Cross-border E-commerce Supervision Center Information Technology Construction Project completed inspection and confirmation of revenue during the reporting period. The special customs supervision zone is an incremental field compared to the company's original port business. The implementation of the above benchmark project has laid a good foundation for the company to expand this incremental blue ocean market across the country.

Overseas and AI are the company's long-term focus. In the first half of the year, the company completed the delivery of projects such as Middle Eastern regional port borders, smart parks, and smart ports in the African region, as well as the expansion of various projects in the Middle East, Central Asia and Africa. At the same time, several projects are being continuously followed up, and international business is progressing comprehensively. In addition, the company invested deeply in AI research and development in various areas, such as testing the M2-GPT application scenario, empowering the Beijing Zhongguancun Comprehensive Insurance Zone project to establish an industry benchmark, and launch next-generation products in the field of intelligent robots. The rich product line and the expansion of new tracks have contributed to long-term development.

Maintain a “Highly Recommended” investment rating. The company expects revenue of 1.688/1.969/2.386 billion yuan in 24-26 and net profit of 0.21/0.247/0.3 billion yuan to mother, maintaining strong recommendations.

Risk warning: Domestic smart port demand falls short of expectations; overseas market policy risks; increased competition, etc.