The semi-annual report was in line with expectations, with net profit attributable to mother +20.92% YoY. 2024H1 achieved operating income of 2.086 billion yuan, a year-on-year increase of 14.53%, and net profit attributable to shareholders of listed companies was 0.074 billion yuan, an increase of 20.92% year-on-year. Net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 0.069 billion yuan, up 37.98% year over year. By industry, the top five industries of the company's revenue were the Internet, finance, automobiles, energy, and communications, accounting for 35.26%/28.96%/8.95%/7.02%/6.06%, respectively. Revenue was +4.5%/-1.76%/+370.29%/+95.59%/+40.25%, respectively.

Revenue in the energy and automotive industries increased dramatically, and new strategic industries are driving growth. 1) The automotive industry continued its rapid development trend, with a year-on-year increase of 370.29%. During the reporting period, the company's main customers in the automotive industry include Ideal Auto, Geely, SAIC Motor, Xiaopeng Motors, and Desai Xiwei. At the same time, it actively participated in the wave of automobiles going overseas, developed overseas testing and vehicle testing solutions, and obtained project targets. In the field of digitalization of automobile companies, we rely on the company's platform-based R&D on AI and the Hongmeng ecosystem, focusing on AI deep customized scenario-based applications and Hongmeng app application R&D services in the automotive industry. 2) Facing the digital transformation and intelligent upgrading needs of the energy industry, the company successfully achieved rapid business growth with professional technical strength and innovation capabilities, with a growth rate of 95.59%. The company's main customers include large central state-owned enterprises such as China Southern Power Grid and CNNC. By working closely with these industry leaders, the company not only provided them with customized software solutions, but also helped them achieve significant improvements in energy management and operational efficiency.

In the local year of “Pure Blood” Hongmeng, Huawei is an ecological diamond-level service provider. 1) In May 2024, the OpenHarmony Developer Conference 2024 was successfully held in Shenzhen, and the “OpenHarmony Device Unified Interconnection Technical Standard” was officially released. The technical standard aims to jointly build a unified ecosystem and achieve interconnection between devices based on the design principles of “universal, modular, and expandable”. 2) Based on years of industry digital service experience and technology research and development capabilities, the company is deeply involved in Hongmeng's native application development and commercial application to provide industry customers with end-to-end Hongmeng native application development and porting services from formulating plans, cost assessments, and formulating delivery plans to software development, testing, acceptance, and operation and maintenance. Promote the cultivation of Hongmeng talents and provide a broad stage for developers to grow. As of the semi-annual report, the company has more than 500 Hongmeng software developers, more than 300 advanced certified Hongmeng application developers, and 18 certified Hongmeng training instructors.

Maintain a “buy” rating. According to key assumptions, considering the progress of order execution in various downstream industries and the progress of “pure blood” Hongmeng, the operating income for 2024-2026 is estimated to be 4.822/6.006/7.526 billion yuan, respectively, and net profit to mother is 0.196/0.293/0.412 billion yuan, respectively, maintaining the “buy” rating.

Risk warning: Risk of technology iteration falling short of expectations; risk of economic downturn exceeding expectations; increased risk of industry competition.