Incidents:

The company released its 2014 semi-annual report. The company achieved revenue of 2.667 billion yuan, a year-on-year increase of 30.5%; the company achieved net profit of 1.36 billion yuan to mother, an increase of 32.13% over the previous year. At the same time, the company plans to implement an interim cash dividend totaling RMB 0.757 billion (tax included).

The business development trend is improving: the growth rate of desktop communication terminal business is recovering, and the share of video conferencing business revenue continues to rise

Since 24Q1, the company's operating level has continued to improve. In the 24Q2 single quarter, revenue is expected to increase by 30.16% year on year and 29.20% month on month. Benefiting from the continuing trend of marginal improvement in downstream demand, the steady advancement of the company's various product lines, and the company's efforts to expand sales channels, the company's three business segments have maintained a good growth trend:

1) Desktop communication terminal business: The company is market-oriented, relies on technology and is supported by quality to consolidate competitiveness and strengthen its market position. In the first half of the year, revenue was 1.51 billion yuan, up 20.26% year on year, and gross margin reached 66.93%, a slight increase over last year;

2) Conference product business: With technical strength, the company continues to create flexible and convenient intelligent scenarios. In the first half of the year, the company achieved revenue of 0.95 billion yuan, an increase of 51.27% over the previous year, and gross margin reached 65.06%, a slight increase over last year.

3) Cloud office terminal business: The company continues to expand its business headset product line and promote channel development. The first half of the year achieved revenue of 0.2 billion yuan, an increase of 29.29% over the previous year.

As the company's revenue recovered and increased, sales and management expenses remained at a relatively stable level, injecting vitality into the operation

1) In terms of sales expenses: 0.122 billion yuan in the first half of the year, the sales expense ratio reached 4.6%, down 1 percentage point from 1H23; 2) Management expenses: 0.06 billion yuan in the first half of the year, with a management expense ratio of 2.2%, which is basically the same as 1H23; 3) Financial expenses: affected by fluctuations in the US dollar exchange rate, exchange income was about 0.043 billion yuan; 4) R&D expenses: 0.197 billion yuan in the first half of the year, a slight increase from the first half of '23.

The company actively rewards investors, and the dividend ratio is increasing. It is predicted that this year's dividend will correspond to the current stock price with a dividend ratio of 3.39%

The company continues to return investors with cash dividends, with cumulative dividends of 3.019 billion yuan from 2019 to 2022, with dividend ratios of 43.7%, 45.9%, 44.7%, and 53.8%, respectively. In 2023, the company paid 0.632 billion yuan and 1.136 billion yuan in half a year and 1.136 billion yuan respectively, and the cumulative dividend in 2023 was 1.768 billion yuan. The dividend ratio trend is upward, with an average dividend ratio of 57.5% from 2019 to 2023. Assuming that the company achieved net profit of 2.605 billion yuan this year, based on the average dividend ratio, it is estimated that this year's cash dividend will be about 1.498 billion yuan, corresponding to the current market value of 44.2 billion yuan, and the dividend rate is 3.39%.

Investment recommendations and profit forecasts:

We believe that maintaining a high level of investment in R&D and continuous product iteration are the core factors that guarantee the competitiveness of the company's product market. In the short term, as demand recovers and the company continues to iterate on technology and products, it is expected to have a positive impact on this year's operations, and growth is expected to resume throughout '24. In the medium to long term, the company continues to strengthen its product capabilities, actively explore sales channels, and resume a high growth trend in the video conferencing product business, providing strong support for subsequent development.

Considering the recovery in the company's downstream demand and the recovery in the growth rate of the three business lines, we expect the company's net profit from 2024 to 2026 to increase from 2.418 billion yuan, 2.813 billion yuan, and 3.327 billion yuan to 2.605 billion yuan, 3.009 billion yuan, and 3,502 billion yuan, maintaining the “buy” rating.

Risk warning: The scale of the mobile phone industry is shrinking, the global competition pattern for video conferencing is intensifying, cloud office business development falls short of expectations, exchange rate fluctuations, etc.