Key points of investment

Rely on state-owned enterprises to master the core technology of the digital transformation wave

Shenzhen Sunda is a digital government IT market leader. It successfully completed system restructuring and integration with China in 2021 and is currently the main force in China's electronic information services sector. China Electronics, the actual controller of the company, is a central enterprise whose main business is cybersecurity and informatization. Total revenue in 2022 reached 51,052 billion yuan, an increase of 15.67% over the previous year. The company relies on industrial services, is deeply rooted in digital and information services, continuously explores new markets, and has enjoyed a high reputation and market influence in the industry.

The development of the data element market is accelerating, the development of the exclusive cloud market is unprecedentedly active, and the process of capitalizing data elements and the establishment of a data market system clearly indicate the central government's attitude of vigorously supporting the development of the data industry. Compared with the US market, which has already entered a stage where corresponding value-added services can be provided based on data, China's data element market is still in its infancy. It is estimated that the industry will have more than 170 billion dollars of market space in 2025. We believe that the big era of industrialization of data elements is about to begin.

At the same time, the “Overall Layout Plan for Building a Digital China” states that it is necessary to “open up the artery of digital infrastructure”, speed up the construction of network infrastructure, systematically optimize computing power infrastructure, and raise the overall level of application infrastructure. According to data from research institutes such as IDC and the China Academy of Information and Communications Technology, as the fastest growing region in the global cloud computing market, China's market size reached 322.9 billion yuan in 2021. The compound growth rate for 2021-2025 is expected to be 26%. At the same time, China's cloud storage market is expected to exceed 180 billion yuan by 2026.

Shenzhen Sunda is an important second-level enterprise under China Electronics. It is a builder and supplier of new digital infrastructure. It is also a practitioner of self-reliance and self-improvement in high-level technology, contributing to the construction of a digital China. The company has formed a series of data factorization engineering products such as data vaults, data element processing and trading centers, and safe and reliable data spaces.

The company focuses on building a data resource system, continuously developing and upgrading existing data products and technologies to help build an operation system with “data” as the core. Shensangda has significant channel advantages in the government and central state-owned enterprises, and is expected to play an important role as an important contractor in the state-owned cloud, boosting the company's digital and information service business to follow the trend. At the same time, the company has strong self-research capabilities and the support of high-quality cooperative groups, and can continuously expand the core competitiveness of products and services. Facing the future exclusive cloud market, it can seize opportunities, and the revenue space is vast.

Shensangda has embraced the digital China process in all aspects. The clean room industry is developing steadily, the government's digital transformation of the industry is deepening comprehensively, and the market space continues to expand. The company focuses on R&D and innovation. It is in a leading position in China in the fields of cloud computing and storage, data innovation, digital government and industry digital services, and has original technology and first-mover advantages. The company has now formed a mature industrial chain and is expected to achieve rapid development in the field of digital and information services in the next few years.

With the development of strategic emerging industries, the cleanroom industry is expected to grow rapidly. According to data from the China Electronics Society, the cleanroom market is expected to reach 358.65 billion yuan in 2026. As a first-tier enterprise in the cleanroom industry, Shensunda enjoys a high reputation and market influence in the industry.

Profit forecasting and valuation

We forecast that the company will achieve revenue of 570.95/645.57/73.73/73.737 billion yuan in 2023-2025, with a year-on-year growth rate of 11.84%/13.07%/13.75% respectively, corresponding net profit of $3.06/475/657 million, and a year-on-year growth rate of 188.77%/55.18%/38.29% respectively, corresponding EPS of 0.27/0.42/0.58 yuan, and corresponding PE of 123.76/79.75/57.67 times. For the first time, the “increase in holdings” rating was covered.

Risk warning

Macroenvironmental risks, risks where policy implementation falls short of expectations, and R&D investment affect the company's overall operating performance