H1 revenue fell 1.54% year over year, pending return of profit margins
DreamNet Technology achieved revenue of 2.328 billion yuan (yoy -1.54%) and net profit of 9.2355 million yuan (yoy -77.03%) in 2024. The decline in profit margins was mainly due to changes in the fair value of transactional financial assets and an increase in financial expenses. Among them, Q2 achieved revenue of 1.228 billion yuan (yoy -7.62%, qoq +11.60%) and net profit of 0.3982 million yuan (yoy -98.64%, qoq -95.49%). Considering the slight negative increase in the company's cloud communications business due to increased competition in the industry, we lowered the relevant revenue and gross margin expectations. The company's net profit for 24-26 is 0.176/0.252/0.317 billion yuan (previous value: 0.251/0.358/0.447 billion yuan). Referring to the average PE of comparable companies, we gave it 43 times PE in 24 years, corresponding to a target price of 9.47 yuan/share, maintaining a “gain” rating.
Launching a new partnership between Huawei and Hongmeng, maintaining rapid international business growth
1H24's cloud communications business revenue was 2.17 billion yuan, -0.19% year over year; other cloud business revenue was 0.158 billion yuan, -16.98% year over year; international business revenue was 0.467 billion yuan, +138.45% year over year. During the reporting period, the company and Huawei strengthened cooperation on Hongmeng to create “5G Yuanxin” products based on 5G messaging, which can screen target audiences through multiple tags such as region, attributes, and interests, achieve accurate marketing content delivery, and help enterprises achieve refined marketing to user groups. Overseas, the company continues to consolidate its competitiveness over a long period of time, increase mobile virtual network operator (MVNO) service licenses, and expand its business in Indonesia. According to the company's interim report, the company has set clear equity incentive plans and performance targets for the international business team, which is expected to drive team enthusiasm and achieve continuous business growth.
The decline in service SMS revenue led to a decline in gross margin. The financial expense ratio increased the company's 24H1 gross margin by 8.40% year on year due to exchange rate fluctuations, mainly due to the year-on-year decline in the share of service information in the traditional cloud SMS business. The 1H24 net profit margin was 0.40%, a year-on-year decrease of 1.30pct; 2Q24 gross profit margin was 8.25%, a year-on-year decrease of 0.49pct, and a year-on-year decrease of 2.16pct. From the cost side, the company's 24H1 sales/management/ R&D/finance expense ratio changed -0.27/-0.11/-0.46/+0.60pct year-on-year. The year-on-year increase in financial expense ratio was mainly due to an increase in current exchange losses.
Optimistic about the company's long-term development and maintaining the “gain” rating
Considering that the company's cloud communications business was slightly negative due to increased competition in the industry, we lowered the relevant revenue and gross margin expectations. The company's net profit for 24-26 is estimated to be 0.176/0.252/0.317 billion yuan (previous value:
(0.251/0.358/0.447 billion yuan), referring to the average PE value of comparable companies, they were given 43 times PE in 24 years, corresponding to a target price of 9.47 yuan/share, maintaining the “gain” rating.
Risk warning: 5G news falls short of expectations; operator price increases risk; market competition increases risk.