Incident: The company released its 2024 semi-annual report. The first half of 2024 achieved revenue of 0.82 billion yuan, an increase of 45.8% year on year; net profit to mother was 0.2 billion yuan, up 35.5% year on year. Revenue for the second quarter was 0.45 billion yuan, up 61.7% year on year and 21.4% month on month, achieving net profit of 0.11 billion yuan, up 35.8% year on year and 31.4% month on month. Performance improved steadily, and profitability continued to improve.

Changes in the revenue structure led to a slight decline in gross margin, and overall profit levels remained high. The company's comprehensive gross profit margin for the first half of 2024 was 45.8%, down 1.7 percentage points from the previous year, mainly due to changes in product structure and an increase in the share of equipment revenue under the company's “equipment first, consumables follow-up” business model. The company's net interest rate in the first half of the year was 25.4%, which remained high, down 2.3 percentage points from the previous year, mainly due to a decrease in exchange earnings.

Domestic sales performed well, and exports continued to grow. The company's expense ratio for the first half of 2024 was 16.6%, an increase of 2.7 percentage points over the previous year, mainly due to an increase in the share of domestic sales and a decrease in exchange earnings due to exchange rate fluctuations. In the first half of the year, the company's domestic sales revenue was 0.41 billion yuan, up 69.5% year on year, showing impressive performance; export revenue was 0.4 billion yuan, up 28.7% year on year, maintaining steady growth. Of the expenses for the period, sales, management, R&D, and finance expenses were -1.8, -0.5, -0.9, and +5.8 percentage points, respectively. Apart from financial expenses, the other three expense rates were well controlled.

The vertical extension was smooth, and production capacity climbed steadily. The company adheres to the “equipment first, consumables follow-up” business model and provides a full range of solutions from ink and machine to application, thereby providing customers with more sticky services. As the company's digital printing equipment market holdings increase, the sales scale of equipment and consumables will continue to increase. In terms of production capacity, the intelligent factory with an annual output of 2,000 sets of printing equipment and consumables for the company's IPO fund-raising project has been officially put into operation, and production capacity and quality have been further improved. The intelligent production line with an annual output of 3,520 sets of printing equipment for the fixed increase project has completed infrastructure work. Production capacity is climbing smoothly, and performance is expected to maintain high growth.

Profit forecasting and investment advice. The company's net profit for 2024-2026 is estimated to be 0.44 billion yuan, 0.55 billion yuan, and 0.66 billion yuan respectively, corresponding to EPS of 2.43, 3.06, and 3.67 yuan, respectively. The net profit returned to mother will maintain a compound growth rate of 26.5% over the next three years, maintaining a “buy” rating.

Risk warning: Risk of fluctuating demand in the terminal market, risk of overseas market risk, risk of core equipment dependence on external procurement, risk of production capacity under construction and production progress falling short of expectations.