The current situation of the company

On March 1, 2022, the company announced in the evening that it would terminate the fixed increase (raising 850 million yuan) of the previous lock-in issue to China Mobile Capital and the chairman of the board, and terminate the "Memorandum of Strategic Cooperation" signed with China Mobile Capital and China Mobile Limited. At the same time, the company plans to issue new fixed growth to the market, intends to issue no more than 12000 million shares to no more than 35 specific investors, and plans to raise 2.2 billion yuan for further research and development of Tong series middleware products, as well as sustainable operation safety product development projects.

Comment

Restart the new bidding fixed increase plan, the scale and coverage are expected to expand. Due to the changes in the capital market environment and comprehensive consideration of the company's own actual situation, development planning and other factors, the company decided to terminate the previous lock-in increase for China shift capital and withdraw the application materials, and proposed to restart the fixed increase plan by way of competitive price increase. From the perspective of fund-raising scale, the newly launched fixed increase of the company plans to raise capital of 2.2 billion yuan, which is much higher than the previous fixed fund-raising scale of locking price. we believe that it will form more abundant financial support for the company's further investment in product research and development and market expansion in the future. From the point of view of the issuing object, we believe that the company can face the market and raise capital for a wider range of industrial investors, and is expected to introduce more diversification, especially strategic investors in the industry; at the same time, we believe that the object of the previous price-locked issue is also likely to participate in the company's new increase again.

The business developed well at the beginning of 2022, and the strategic layout was promoted in an orderly manner. Since the beginning of 2022, the company's basic software business and security solution business have made good progress, especially in the Beijing Winter Olympic Games at the beginning of the year. Dongtong is deeply involved in the communication guarantee and emergency security work related to the major areas of the Winter Olympic Games. In this additional project, the company will further strengthen the research and development of emergency and safety-related platform products for public security and other areas, and we believe that this part of the company's business will also become another major increase in the company's revenue growth in the future. In addition, although the "Memorandum of Strategic Cooperation" signed by the company and China Mobile Limited was also terminated this time due to the termination of the previous price-locking increase, the cooperation between the company and key strategic customers such as China Mobile Limited is still progressing gradually. with the promotion of localization in major industries in 2022, we believe that the company's basic software business with middleware as the core will also continue the trend of rapid development.

Valuation and suggestion

Due to the fierce competition in the domestic middleware market since the second half of 2021, product prices fluctuate, which may affect the company's short-term performance. We lowered the company's 2021 Universe revenue forecast for 2022 by 14% to 867 and net profit forecast of 26% to 293 and 480 million, and introduced revenue forecast of 1.633 billion yuan and net profit forecast of 682 million yuan for 2023. Maintain the outperform industry rating, switch the valuation to 38 times 2022 price-to-earnings ratio, and maintain the target price of 39 yuan. The target price has 40% upside over the current share price, which corresponds to 27 times 2022 p / e.

Risk.

The progress of domestic substitution is not as expected; the risk of market competition.