Zhitong Financial APP learned that Haitong International released a research report saying that Lingxiong Technology (02436) was rated "better than the market" for the first time, with a target price of HK $17.51. DLM industry seems to be a simple business logic, but in fact, the threshold is very high, and the overall business operation has high requirements for capital, operational efficiency and scale. At present, there are a large number of enterprises in IT equipment subscription and rental operation industry, but the scale of enterprises is generally small due to capital, technology and other factors. Lingxiong Technology, as a leading player in this field, benefits from its unique development model and the ability of digital transformation. According to estimates, the company is valued at 5.54 billion yuan in 2023 and is expected to achieve a total revenue of 17.97 billion RMB 24.05 / 3.401 billion yuan in 2022-24; the adjusted EBITDA is 2.89 Universe 4.24 / 697 million RMB, and the adjusted net profit is 5 million / 46 million / 133 million RMB. The company has passed the break-even point and will continue to make profits in the next three years.
The main points of the report are as follows:
China's largest enterprise-level DLM (equipment Lifecycle Management) supplier.
Xiaoxiong U Rent, a brand under Lingxiong Technology, is the largest enterprise DLM supplier in China, providing enterprises with full-stack services, including IT equipment subscription, IT technical services, SaaS-based equipment management services and IT equipment recycling, to solve the pain points of one-time purchase of IT equipment, such as financial pressure, slow technical support response, poor flexibility of IT equipment management and low utilization of IT equipment. Comprehensively solve the equipment life cycle management problems faced by Chinese enterprises, and help enterprises reduce costs, increase efficiency and develop with high quality.
Future Development trend of DLM Industry
1) customers light asset operation.Driven by DLM, light-asset office work will become more common. As enterprises no longer need to purchase IT fixed assets, enterprises will maintain a better cash flow to invest in core business development.2) various types of equipment.In the next few years, the demand for a variety of IT device categories will continue to expand. Computers and printers and photocopiers are expected to account for the largest share of the long-term subscription market, while conference equipment will maintain the fastest growth as new entrants to the market.
3) broaden the service portfolio.With the increasing demand of enterprises for full-stack IT equipment lifecycle management, DLM providers will provide a full set of service combinations including equipment subscription services, IT technology subscription services, equipment management services and equipment recycling services to enhance synergy.4) the permeability of DLM increases continuously.It will be a trend for Chinese enterprises to adopt DLM model. Small and medium-sized enterprises adopt equipment subscription services to avoid the large initial purchase cost of IT equipment, while large companies are gradually adopting DLM portfolio to achieve equipment lifecycle management. As the business scenario of DLM becomes more and more extensive, the market penetration will increase year by year.
China's IT equipment subscription industry has great potential.
Compared with overseas markets, the penetration of IT equipment subscription model in China is very low. According to the relevant report released by DBI, the penetration and acceptance of IT equipment leasing abroad is much higher than that in China, while the penetration rate of IT equipment leasing in the United States is 59%. In Europe, 63 per cent of IT listed companies adopt the equipment leasing model, while in China, the market penetration rate of IT equipment leasing (including financial leasing) is only 4.9 per cent, and the market potential is huge (Lingxiong's potential market growth space is 20 times).
The company has core industry barriers.
IT device subscription industry seems to be a simple business logic, in fact, the threshold is very high, especially to become an industry leader. The company's core competitiveness (industry barriers) includes:(1)Closed-loop DLM ecology can produce strong synergy, IT equipment utilization is significantly improved, cross-selling consolidates its synergy and customer stickiness is very high.(2)Perfect and strong recycling and renovation industry chain. Collecting as much as you can, collecting as much as you can, and selling as you like, is the core of recycling service, is a strong service, and has a strong support and synergy effect on equipment subscription service.(3)Intelligent risk control system is very important to the development of DLM business, and the company maintains a very low bad debt rate all the year round.(4)Strong support from strategic shareholders. The company has three major industrial strategic shareholders, JD.com, Tencent and Lenovo, as well as government industrial funds to provide them with valuable resources. JD.com has completed the deep integration at the system platform level with the company, and has fully opened up the ingress traffic for the company. Its 8 million enterprise customers can purchase the IT equipment subscription service leased by Xiao Xiong directly on the JD.com platform.
DLM first mover advantage
According to the information of Zhuangshi Consulting, the company is one of the first companies to enter China's DLM industry. After years of deep cultivation and development, the company has successfully built a digital closed-loop DLM business model. Mainly promote Lenovo, Hewlett-Packard, Dell and Apple Inc four brands of IT equipment. According to the statistics of Jingshi Consulting, Lingxiong Technology is the largest enterprise DLM supplier in China by revenue in 2021 and the first company in China to build a digital, multi-scene and closed-loop DLM business model. The company's IT equipment lifecycle management closed-loop system provides a full range of services, comprehensively solves the key problems of equipment lifecycle management faced by Chinese enterprises, and obtains the strategic investment and industrial resources of JD.com and other shareholders. It has formed a certain scale effect, has a significant first-mover advantage, and has strong bargaining power to upstream suppliers to reduce equipment procurement costs. In terms of channel expansion ability and resource integration ability, it is also deeply integrated with JD.com, Tencent and Lenovo to expand customers in different industries, integrate upstream and downstream, and create industrial ecology.
Strong synergy
The company's DLM closed-loop ecology can produce strong synergy, the utilization rate of IT equipment is significantly improved, and the cross-selling machine will further consolidate its synergy. The utilization of IT devices increases due to their deployment in multiple business scenarios, such as long-term and short-term device subscription services. The company selects the equipment with high residual value from the equipment recycling service to supply the inventory of subscription equipment, so as to make full use of existing resources and save costs. In addition, the company's SaaS-based device management services can also provide cross-selling opportunities to connect equipment subscription services, IT technology subscription services and equipment recycling services. For example, Little Bear U Butler will automatically identify the depreciation life of IT equipment and recommend appropriate IT equipment recycling solutions for business users, as well as equipment subscription services or IT technology subscription services for enterprises that need new IT equipment and equipment maintenance or repair.
Through the synergistic effect of DLM closed-loop system, the company's operating indicators maintain a good level. The number of subscription devices continues to grow rapidly, with CAGR of about 40% from 2019 to 2021 and reaching 455000 in 2021. The net income retention rate of long-term equipment subscription customers continued to increase and maintained a high level, from 2019 to 2021, 117.4%, 113.8%, 138.8% respectively. The retention rate of KA customers continued to increase synchronously, at 78.9% and 84.2% from 2019 to 2021, respectively. The number of recycled and refurbished equipment continues to grow, with CAGR of about 66% from 2019 to 2021 and reaching 1.375 million in 2021. The refurbished equipment includes the obsolete equipment that the company provides to the customer for subscription, and the obsolete equipment that the company recycles from the customer for equipment subscription service or sale. The company's cross-selling strategy can generate more revenue from each customer on the list. For example, between 2019 and 2021, the average income of each major customer of long-term equipment subscription service was 82436 yuan, 117101 yuan and 153312 yuan respectively, with a compound annual growth rate of 36.4 percent.