China's cutting-edge data analysis and decision intelligence service organizations are transforming and upgrading to “data intelligence application software”. The company is deeply involved in many fields of public affairs and business services, and sorts out and optimizes models and algorithms for different vertical industries, driven by third-party evaluations and by solving key problems in application scenarios. In the era of data intelligence, the company continuously integrates new technologies in the fields of mobile Internet, artificial intelligence, cloud computing, Internet of Things, etc., combines multi-source data with vertical industry scenarios for public and commercial services, and realizes the expertise accumulated over 20 years of “experience modeling, model algorithms, and software algorithms” to promote scientific decision-making and service efficiency. Currently, the company is gradually transforming and upgrading from “data analysis reports” to “data intelligence application software”. In the future, the company will vigorously develop the data intelligence application business, and data intelligence application products will become an important profit growth point for the company.

The prospects for data intelligence are broad, and the company aims to become an excellent service provider for data intelligence applications. On the G side, the “Overall Layout Plan for the Construction of a Digital China” proposes that the construction of a digital China should achieve significant progress in 2025 and comprehensively empower economic and social development. One of these is to develop efficient and collaborative digital government. The “Work Plan on Daxing Investigations and Research Across the Party” states that investigation and research should be closely integrated with work decisions, and that each member of the leadership team at or above the county department level will take the lead in carrying out research on one topic. We believe that with the advancement of the digital economy and the improvement of the government's data element base, China's public data intelligence is expected to usher in a new wave of construction. On the B side, business data intelligence is inseparable from the digital transformation of enterprises. According to estimates published by iResearch, the business data intelligence market size will increase to 346 billion yuan in 2025, and CAGR between 2020 and 2025 is about 30.3%, showing a rapid growth trend. However, the company has deep accumulation on both the G side and the B side. The company's industry experience, data and algorithm technology, and software development capabilities combine to form the company's core competitiveness in the field of data intelligence application software.

Based on research and development, integrating industry experience to build a strong technology moat. The company has been deeply involved in researching the consulting industry for more than 20 years and has a deep understanding of industry application scenarios and the characteristics and values of various data resources. This enables the company to more quickly and accurately grasp the business characteristics and needs of customers in the development of applied algorithms, thus supporting the development and development of the company's software business. On the other hand, the company focuses on the application of cutting-edge technology in business. Continuous technological innovation has enabled the company to keep its own technology developing at the same time as social technology. Behind this is the company's deep investment in R&D. In the first half of 2022 alone, the company's R&D expenses reached 305.22 million yuan, accounting for 32.72% of operating income. The importance that the company places on research and development has enabled the company to continuously develop new fields while continuously improving its overall technical strength. The technological moat has become more “broad and deep”, which ultimately has jointly established the company's long-term stable core competitiveness.

Profit forecasts and investment recommendations. We believe that as a cutting-edge data analysis and decision intelligence service organization, the company is deeply involved in many fields of public affairs and business services, and has deep accumulation on both the G side and the B side. Currently, the company is actively transforming and upgrading from “data analysis reports” to “data intelligence application software”, and has achieved certain results. With the continuous development of the data intelligence field, the company is expected to continue to grow steadily. We expect the company's net profit for 2022/2023/2024 to be -0.12/0.52/69 billion yuan respectively, and EPS to be -0.16/0.72/0.95 yuan respectively, giving the 2023 dynamic PS 12.5 times the corresponding target price of 67.24 yuan. For the first time, coverage gave it an “superior market” rating.

Risk warning. The company's strategic business switching fell short of expectations, and industry demand and progress fell short of expectations.