Key points of investment:

Revenue growth was low in the first half of the year, with smart channel products accounting for the majority. 2024H1's revenue was 0.781 billion yuan, +6.53% year over year; net profit to mother was 0.118 billion yuan, or -52.92% year over year; after deducting non-net profit of 0.123 billion yuan, +6.58% year over year. By product, smart channel product line revenue was 0.308 billion yuan, or +1.46% year over year, accounting for 41.51% gross profit margin; collaborative office product line revenue was 0.245 billion yuan, +13.22% year over year, accounting for 33.02%, gross profit margin 50.52%; cloud and big data product line revenue was 0.189 billion yuan, +11.57% year over year, accounting for 25.47%, gross profit margin 40.17%.

The three product lines have been fully upgraded around AI and metaverse two-wheel drive. ① Collaborative office product line. In the first half of 2024, the company's original RichMail Xinchuang email and collaborative office business grew steadily, while continuing to intelligently upgrade the product line. Based on the company's one-stop AI application development platform RichaiBox, it was successfully used in customer projects in the first half of 2024 to provide customers with digital employee products and solutions for various scenarios such as enterprise micro shopping guides, real estate intelligent consultants, and office assistants. ② Smart channel product line. In the first half of 2024, the smart channel core business stock increased steadily, customer stickiness was strong, and cooperation was close. Vigorously invest in the R&D of innovative products integrating AI+ digital human technology, including digital image customization platforms, AI online choreography, digital human live streaming platforms, and metaverse business offices to meet customers' multi-scenario business innovation needs. The company officially signed a contract with Huawei and reached a cooperation with Hongmeng. ③ Cloud and big data product lines. The cloud and big data business continued to grow steadily in the first half of 2024. In terms of cloud services, we assist customers to provide professional cloud consulting services and solutions throughout the country to achieve high-quality delivery. In the field of computing power, we jointly develop RichaiBoost, a next-generation AI computing power cluster management platform; integrate the ecological capabilities of hardware vendors, jointly promote and sell Shengteng server products, and create intelligent computing center service capabilities integrating software and hardware. The main projects in the first half of 2024 include the China Mobile Cloud Drive Development Project and the China Mobile Cloud Drive Operation and Maintenance Project.

Continue to invest in AI and participate in the operation of the Intelligent Computing Center. ① In terms of AI, email has been being developed since last year. From the functions of intelligent generation, intelligent summary, intelligent response, and intelligent classification of the initial design plan, the functions are still being enriched; secondly, in the cloud business, the company has developed an intelligent computing center layout combining software and hardware since the beginning of the year, which is currently being gradually implemented, and is expected to be reflected in revenue and profit in the second half of the year. Furthermore, the company's AI platform supports various applications by connecting large models, knowledge maps, expert knowledge bases, etc., to help enterprises actually apply AI capabilities to core scenarios. ② In the intelligent computing center business, the company is involved in the core computing power operation process, including from early planning and deployment to late operation and maintenance management, that is, the software side of the entire computing power center. Currently, there are few domestic teams with operating capabilities and operating experience in kilocar clusters, and the company is forming a team that has operated the entire process from planning and deployment to post-operation and maintenance. The target customer base is first to meet the company's own business needs, then big model manufacturers will become the main customer group, with great business value. Furthermore, the market may see the rise of popular AI application inference end customer groups in the future.

Hongmeng is a core partner manufacturer in the software field, with diverse business models and broad space. ① As an ecological partner of Huawei, Caixun Co., Ltd. has a certain layout in the field of Hongmeng ecological enterprise applications. At the same time, the company is also promoting and selling Ascend server products. In addition, the company is also one of Huawei's core partners in the corporate office field. Since Huawei attaches great importance to the Hongmeng upgrade in the B-side enterprise office sector, the company will have more opportunities to cooperate with it in the field of collaborative office. On August 7, Huawei hosted the Hongmeng Enterprise Office Conference. Many vendors participated. MMS was the only email vendor among them. ② In terms of the Hongmeng business model, the first is to cooperate with customers to develop the Hongmeng version of existing application software, such as the development of the Hongmeng version of the mobile phone business office. MMS won the bid in February of this year to develop the first version for it. The second is cooperation with Huawei. As the core service provider of Huawei's ISV, CaiXun cooperates with Huawei to promote the construction of the Hongmeng ecosystem. Currently, orders for KFC vehicle engine service have been placed, and CaiXun has also been actively responding to customer orders from Huawei Hongmeng to develop Hongmeng software for downstream applications. Judging from the current share of the company's business, the share of Huawei's business is not high, but it is expected that the share will increase in the future after the company's software and hardware services are embedded in the Huawei ecosystem.

Profit forecasting and investment advice. The company's Xinchuang email Richmail is the preferred domestic email address for the top 500 in China, and is a close partner of the state-owned cloud, which is expected to benefit from the development of domestic software and the promotion of Xinchuang. By business, software product development and sales are mainly customized commercialized software and customized engineering software. Technical services include technical support related to IT operation and maintenance management provided to customers. System integration includes sales and installation of outsourced software and hardware products and company software products. It is expected that in the future, with the advancement of Xinchuang and state-owned clouds, software product development and sales will show a high rate of growth, and system integration and technical services will also follow a steady growth trend. We expect the company's net profit for 2024-2026 to be 0.333/0.396/0.493 billion yuan, EPS of 0.74/0.88/1.10 yuan respectively, giving the company 30-35 times PE in 2024, and a reasonable value range of 22.32-26.04 yuan in 2024, giving it a “superior to the market” rating.

Risk warning: AI strategy progress falls short of expectations; downstream demand is insufficient; industry competition intensifies, etc.