Sangfor Technologies (300454) 浙商证券·2024-08-24 12:23Investment Rating - Buy (Maintained) [6] Core Views - The company's strategic new products maintained revenue growth, with a significant improvement in Q2 2024 profits [1] - Revenue from key strategic new products continued to grow, while traditional products faced declines due to weak industry demand [3] - Cost control measures exceeded expectations, offsetting the pressure from declining gross margins, leading to a year-on-year improvement in Q2 2024 profits [4] - The company is advancing its "AI First" innovation strategy, with significant progress in AI-related products such as Security GPT and AI Computing Platform (AICP) [5] - Adjusted revenue forecasts for 2024-2026 are 7,681, 8,079, and 8,767 million yuan, with net profits of 246, 283, and 402 million yuan, respectively [10] Business Performance Summary - In H1 2024, the company reported revenue of 2,707 million yuan, a year-on-year decrease of 7.72%, and a net loss of 592 million yuan, down 6.94% year-on-year [2] - In Q2 2024, revenue was 1,672 million yuan, down 2.84% year-on-year, but net profit improved to 103 million yuan, up 27.1% year-on-year [2] - Revenue from security, cloud computing, and basic network & IoT businesses were 1,398, 1,106, and 203 million yuan, respectively, with declines of 7.3%, 4.4%, and 24.1% year-on-year [3] - Enterprise clients showed resilience, with revenue increasing by 2.5% year-on-year, accounting for 51% of total revenue [3] Cost and Profitability - Gross margin in H1 2024 was 61.34%, down 3.14 percentage points year-on-year, primarily due to rising raw material costs [4] - Total expenses decreased by 7.4% year-on-year, with sales and R&D expenses down by 10.3% and 5.3%, respectively [4] - The company's cost control measures helped offset the impact of declining gross margins, leading to a 27.1% reduction in net loss in Q2 2024 [4] AI and Innovation Strategy - Security GPT 3.0, launched in January 2024, has been tested and delivered in over 130 real-world environments, reducing security event processing time from 3 hours to 5-10 minutes [5] - The AI Computing Platform (AICP) was fully opened for testing in May 2024, supporting mainstream open-source large models and providing heterogeneous computing power management [5] - Distributed Storage EDS 502, launched in January 2024, showed strong growth in H1 2024, targeting high-end unstructured data production scenarios [9] Financial Forecasts - Revenue for 2024-2026 is forecasted at 7,681, 8,079, and 8,767 million yuan, with net profits of 246, 283, and 402 million yuan, respectively [10] - Earnings per share (EPS) for 2024-2026 are projected at 0.59, 0.67, and 0.96 yuan [12] - The company's long-term outlook remains optimistic due to the growth of strategic product lines and advancements in AI [10] Market and Industry Context - The security hardware market in China declined by 0.9% in 2023, with weak downstream demand [3] - The cloud computing market is expected to grow at a CAGR of 17.4% over the next five years, with the company's hyper-converged and storage products showing positive growth [3] - The exit of Citrix from the Chinese market is expected to create growth opportunities for the company's desktop cloud business [3]