The company released its 2024 semi-annual report. The company's revenue for the first half of 2024 was 0.376 billion yuan, up 16.2% year on year, and net profit to mother was 7.73 million yuan, turning a loss into a profit. The company's revenue for the second quarter of 2024 was 0.196 billion yuan, an increase of 4.3% over the previous year, achieving net profit of 0.74 million yuan to mother, turning a loss into a profit.

The quality of operations has been steadily improved, and losses have been reversed. In the first half of 2024, the overseas telecom market continued to recover. The company seized the window, domestic and foreign payment acceptance projects continued to increase, revenue from core network systems, digital intelligence networks and smart emergency systems increased steadily, and gross margin of delivered projects increased. At the same time, the company focused on cost control and cost reduction, and strengthened control over sales expenses, management expenses, and R&D expenses. On the other hand, the company strengthened repayment management, and sales repayments increased during the same period. It is expected that credit impairment losses will decrease compared to the same period last year, and various factors jointly helped the company reverse losses.

Overseas telecom orders are recovering at an accelerated pace. In the first half of 2024, the company continued to make efforts in the South Asian and Southeast Asian markets. It successively obtained the Bangladesh Banglalink ISBC Project Phase III construction order, the Bangladesh Ringtech ICX Project Phase II construction order, and the Bangladesh AGNI ICX Project Phase II construction order; obtained a Southeast Asian operator customer Cloud PBX project order; obtained an order for India's TATA IMS capacity expansion; and provided optical transmission product operation and maintenance services to India's BSNL. Also, in the Middle East market, the company continues to expand the operator's fixed network access network in Iraq. At the same time, in the African market, the company relied on 5G private network technology and the AIOT technology advantages of its subsidiary Shenzhen Zhenyou Zhilian to help build a 5G private network at the Endo dam in Cunene Province, Angola; it received an order for the fourth phase of the ATSS project in Mauritania.

The core supplier of satellite communications is expected to establish a new growth curve. The company continued to make efforts during the reporting period to obtain equipment and service project contracts for satellite communication projects in a certain country, with a total contract amount of 0.112 billion US dollars (excluding tax); won bids for several satellite Internet core network projects and projects related to the direct mobile phone connection satellite business; and continued to expand core network-related businesses around 5G+ satellites, such as the Beidou satellite image voice multimedia communication project.

The domestic public private network business is developing steadily, and the basic business market has been established. In terms of domestic public network business, the company continued to cooperate closely with domestic telecom operators during the reporting period to obtain China Telecom's Tiantong 1 core network expansion order; won the bid for China Unicom's 5G Private Network Gateway Phase II project and China Radio and Television 5G Core Network Phase II - Welcome SMS system project; in the F5G field, it successively won bids and landed in XG-PON equipment projects of provincial operators such as Xiong'an Radio and Television, Hunan Radio and Television, Hubei Radio and Television, Fujian Radio and Television, and Chongqing Radio and Television. In the domestic private network field, the company successfully won the bid for the China Radio and Television 5G to B private network project with self-developed core networks, wireless base stations, network management products and service capabilities that have been cultivated over many years.

Investment advice: We expect the company's revenue for 2024-2026 to be 1.11/1.33/1.53 billion yuan, net profit to mother 0.04/0.1/0.14 billion yuan, and the corresponding PE is 69/28/20x, respectively. In recent years, due to difficulties in overseas construction, slow repayments from customers in some countries, the company's profitability has been affected to a certain extent, and we have revised our profit forecast to a certain extent. However, in the long run, the company is the technology owner of China's communications core network. At the same time, it actively lays out satellite communications. Overseas telecom orders are recovering at an accelerated pace, net profit to the mother reverses losses, and the operating situation continues to improve, maintaining a “gain” rating.

Risk warning: Global operators' capital expenditure is declining, satellite internet construction progress falls short of expectations, and overseas operators' repayment risk.