Core Viewpoint - The company reported strong revenue growth in the first half of 2025, driven by significant increases in its government and enterprise sectors, as well as international business expansion [1][2]. Financial Performance - In 1H25, the company achieved revenue of 47.425 billion yuan, a year-on-year increase of 24.96%, and a net profit attributable to shareholders of 1.041 billion yuan, up 2.19% [1]. - For Q2 2025, revenue reached 26.635 billion yuan, reflecting a year-on-year growth of 27.17%, while net profit was 0.692 billion yuan, increasing by 18.01% [1]. Business Analysis - The subsidiary, Xinhua San, experienced substantial revenue growth, with government and enterprise revenue approximately 18.78 billion yuan in Q2 2025, marking a year-on-year increase of 66% and a quarter-on-quarter increase of 53% [2]. - International business revenue was 0.87 billion yuan, showing a year-on-year growth of 48%, although it decreased by 17% quarter-on-quarter [2]. - The increase in government enterprise revenue is attributed to heightened demand for AI servers from internet clients and a rising proportion of revenue from 400G/800G high-speed switches [2]. - The company's gross margin in Q2 2025 decreased by 0.77 percentage points, primarily due to the higher proportion of lower-margin AI server sales [2]. Cost Management - The company demonstrated improved cost control, with both sales and management expense ratios declining quarter-on-quarter [3]. - The domestic AI chip replacement is accelerating, positioning the company to benefit from the increased adoption of domestic AI chips in its server business [3]. - The company reported a 66% year-on-year increase in contract liabilities in Q2 2025, laying a solid foundation for future revenue growth [3]. Market Position and Outlook - The company holds a 31.1% market share in the Ethernet switch market, ranking second overall, and is expected to achieve breakthroughs in the Scale-up domain due to strong demand for high-performance switches [3]. - The company is proactively launching new products, including the H3C S9825-8C-G 800G data center intelligent computing switch, which utilizes over 95% domestic components [3]. - The long-term outlook for the Scale-up Ethernet switch market is positive, driven by increasing demand for ultra-low latency and high throughput solutions [3]. Profit Forecast and Valuation - Revenue projections for 2025-2027 are estimated at 90.84 billion yuan, 103.59 billion yuan, and 114.75 billion yuan, with year-on-year growth rates of 15%, 14%, and 11% respectively [5]. - Expected earnings per share (EPS) for the same period are 0.74 yuan, 0.88 yuan, and 1.03 yuan, with price-to-earnings (PE) ratios of 38, 32, and 27 times [5].