Investment highlights:

Total revenue increased slightly, and net profit declined. From January to June 2024, the company achieved total operating income of 0.148 billion yuan, a year-on-year increase of 0.14%; net profit attributable to shareholders of the parent company was 0.1 billion yuan, a year-on-year decrease of 15.45%. By business, 1) software sales revenue was 0.054 billion yuan, down 5.99% year on year, accounting for 36.48% of revenue, year on year -2.38 pct; 2) software (maintenance) service revenue of 0.06 billion yuan, up 8.06% year on year, accounting for 40.93% of revenue, +3.00pct year on year; 3) revenue from securities information services was 0.033 billion yuan, down 1.00% year on year, accounting for 22.51% of revenue, -0.26pct year on year; 4) revenue from other businesses 0.1156 Million yuan, down 82.10% year on year, accounting for 0.08% of revenue, -0.36pct year on year.

The gross margin has been rising steadily, and the increase in R&D investment has led to a decline in net profit margin. From January to June 2024, the company's gross sales margin was 82.60%, up 1.99 percentage points year on year; net sales margin was 68.01%, down 12.49 percentage points year on year. By business, the gross margin of software sales/software services/ securities information services/ other businesses was 98.17%/89.52%/45.15%/-16.42%, respectively. In terms of the cost rate for the period, from January to June 2024, the company's sales expense rate/ management expense rate/ R&D expense ratio were 2.11%/3.31%/28.08%, respectively, -0.32pct/-0.06pct/+6.45pct. The decrease in sales expenses and management expenses is mainly due to varying degrees of decline in employee remuneration, travel, business hospitality, housing-related expenses, business promotion, and bidding services. The increase in R&D expenses is mainly due to the company's increased investment in market data system research and development and an increase in personnel remuneration.

Focus on the innovation and development of the main business, and the “bond” trading system creates new momentum. 1) Continued increase in R&D investment. 2024H1, the company's R&D expenses were 41.4505 million yuan, +30.02% compared with the same period last year. Mainly for investment in market system R&D, we expect to contribute revenue from 2024H2-2025. 2024H1 completed the upgrade and iteration of the low-code platform system tools, completed market access for 6 currency brokers, interbank CFETS bond market data access, and continuous development of bond market systems, completed the integration of bond thematic functions, bond F9 upgrade and iteration, bond sidebar development, and bond browser index updates. 2) 2024H1, the renewal and iteration of Xinchuang business to promote stable, moderate and positive B-side business. Securities trading system sales and maintenance service revenue was 114.2755 million yuan, +0.95% year-on-year, accounting for 77.41% of revenue. Thanks to the continuous deepening of capital market reforms, B-side service revenue has grown steadily, and the cultivation of new productivity has not been relaxed. The digital transformation of the securities industry is imperative, and the credit innovation industry is entering a stage of deepening development. The Xinchuang business is expected to become an important driver for B-side business. 3) The rise in C-side business contributed to increased performance. The company's C-side business (securities information service) achieved revenue of 33.2358 million yuan in the first half of 2024, accounting for 22.51% of total revenue. According to data from Yiguan Qianfan, in June 2024, the Tongdaxin App reached 2.1924 million monthly active users, ranking 7th among third-party securities service applications. Referring to the official website data of various companies, Wealth Trend Mobile Level-2 is priced at 60 yuan per year. Compared with Dongfang Wealth 68 yuan/year, which is 48 yuan/half a year in Flush, the lower pricing helps attract traffic and contributes to increased performance.

Fundraising projects such as Tongda Credit are progressing steadily, and some projects have achieved phased results. 1) As of 2024H1, the company had four main fund-raising projects. The total amount of pre-investment plus overraised capital was 1.714 billion yuan, mainly supported by raising capital through IPOs. As of 2024H1, a total investment of 0.297 billion yuan has been made, and the investment schedule is in line with the planned schedule. Among them, Tongdaxin's big data-based industry safety monitoring system project has been completed. As of the first half of 2024, benefits of 1325.90 yuan have been achieved. 2) The Tongdaxin Professional Investment and Trading Platform Project has completed the main functional points of the project requirements and has entered the testing phase. As of 2024H1, the project has invested a total of 59.2864 million yuan. The long-term goal is to develop a professional investment and trading platform suitable for all types of investors such as private investors, professional investors, active trading customers, high-net-worth customers, and individual retail investors. The remaining three fund-raising projects have all achieved phased results of varying degrees, obtained software copyrights at corresponding stages, and products for some projects have already begun to be sold abroad. We expect the Xinchuang project to remain the company's main performance ballast in 2024 and 2025.

Profit forecast and investment rating: We expect the company's total revenue for 2024-2026 to be 0.473, 0.512, and 0.549 billion yuan, respectively, net profit to mother 0.314, 0.353, 0.378 billion yuan, and EPS 1.71, 1.93, and 2.07 billion yuan, respectively. As of September 30, 2024, the closing price was 157.56 yuan, corresponding to the 2024-2026 PE valuation of 52.08, 46.31, and 43.17 times, respectively. As an important supplier of domestic securities market trading system software and securities information services, the company benefits from the continuous expansion of fund-raising project results, and the continuous accumulation of advantages of superimposed data resources, product development and technological innovation. It is expected that the market share will continue to increase. The market share is expected to continue to increase. For the first time, coverage was given a “buy” rating.

Risk warning: the risk of technological innovation and application, the risk of further intensification of industry competition, the risk of policy and legal compliance risks, the risk of the impact of fluctuations in capital market sentiment, and the risk of a single business and customer structure.