ZHONGTAI SECURITIES·2024-08-20 01:30Investment Rating - The investment rating for the company is "Buy" (maintained) [2][6] Core Views - The company has shown steady performance with revenue and net profit growth. In H1 2024, domestic network business faced pressure due to the overall investment environment, while international business continued to grow at double-digit rates. The company has successfully expanded its enterprise and consumer business, achieving revenue growth of 56.1% and 14.3% respectively [4][5] - The company is actively innovating in the connectivity field, with 5G-A expected to contribute to new growth. It ranks second globally in the shipment of 5G base stations and core networks, and has launched several innovative products in collaboration with major operators [4][6] - The company is transitioning towards a "connection + computing power" model, enhancing its market space by focusing on AI computing power and related products. It has maintained a leading position in the domestic operator market for servers and storage [4][6] Financial Performance Summary - Revenue (in million CNY) is projected to grow from 124,251 in 2023A to 172,307 in 2026E, with a CAGR of approximately 11% [2][7] - Net profit (in million CNY) is expected to increase from 9,326 in 2023A to 14,423 in 2026E, reflecting a growth rate of 17% in 2026E [2][6] - Earnings per share (EPS) is forecasted to rise from 1.95 in 2024E to 3.02 in 2026E [2][6] Cost Management and Profitability - The company has effectively controlled costs, with a decrease in sales, management, R&D, and financial expense ratios in Q2 2024 compared to the previous year. The net profit margin improved to 9.14%, while the gross margin was 40.47% [4][6] - R&D expenses accounted for 20.4% of revenue, with over 90,000 global patent applications, including around 5,000 in the AI field [4][6] Market Position and Future Outlook - The company is positioned as a leader in the domestic ICT sector, actively expanding into IT and innovative second-line businesses. The forecasted net profits for 2024-2026 are 106.45 billion CNY, 122.92 billion CNY, and 144.23 billion CNY respectively [5][6] - The company is expected to benefit from the ongoing digital transformation and the increasing demand for AI-related products and services [4][5]