Core views:

The company disclosed its 2024 semi-annual report. Light and combined investment in the equity market continued to increase, dragging down the company's revenue and profit growth. (1) 24H1: Revenue 2.836 billion yuan, yoy +0.32%; net profit attributable to mother 0.03 billion yuan, yoy -93.30%; net profit not attributable to mother 0.136 billion yuan, yoy -48.81%. Non-recurring profit and loss was about -0.106 billion yuan, mainly due to a sharp year-on-year decline in income from changes in the fair value of financial assets. (2) 24Q2: Revenue 1.648 billion yuan, yoy -2.88%; net profit attributable to mother 0.066 billion yuan, yoy -70.56%; net profit not attributable to mother 0.114 billion yuan, yoy -39.97%.

The layout of Xinchuang has been further improved, and it is expected that it will be the first to benefit from the acceleration of financial credit innovation. The company continues to promote the adaptation of Xinchuang software and hardware, and continues to enhance the competitiveness of the new generation of Xinchuang versions. During the reporting period, eight main products, including O45 and TA6, were tested and certified by the exchange in the first half of the year; completed the basic software and hardware configuration plans of Xinchuang for all main products; and implemented the packaging and signing of Xinchuang's integrated solutions in the securities and futures industry. (Source: Company's Annual Report for the Year 24)? Process management changes promote continuous improvement in management efficiency. In terms of system construction, business and finance integration is achieved through IFS changes on the financial side; through IOD changes on the human side, the remuneration system, bonus formation mechanism, and organizational system are further optimized. By the end of the first half of the year, the total number of people in the company was 12,700, a decrease of 489 compared to the end of 23, and the talent structure was continuously optimized. During the reporting period, the company's sales expenses, management expenses, and R&D expenses decreased by 6.15%/3.75%/0.8% compared to 23H1; sales expenses rate/ management expenses rate/ R&D expenses ratio decreased by 0.95pct/0.57pct/0.46pct compared to 23H1, respectively.

Profit forecasting and investment advice. Considering that financial institutions' IT budget execution is weakening due to financial industry sentiment, we lowered the company's performance expectations. The company's net profit for 24-26 is 1.249/1.911/2.31 billion yuan, yoy -12.30%/53.0%/20.9%, respectively.

PE was given 30 times for 24 years, with a reasonable value of 19.79 yuan/share, maintaining the “gain” rating.

Risk warning. Capital market reforms fell short of expectations; promotion of the company's new products fell short of expectations; progress in financial credit innovation fell short of expectations.