Economic construction has always been at the core of the country's development strategy. Among them, micro, small and medium-sized enterprises, as an important force driving the country's economic development, account for more than 90% of China's market, and play an extremely critical role in promoting employment and innovation.

Therefore, in order to guarantee the continuous and stable development of micro, small and medium-sized enterprises, China has continuously strengthened financial and tax support for micro, small and medium-sized enterprises to stimulate the rapid growth of the fiscal and taxation solutions market. This has also attracted many investors to explore the investment opportunities hidden behind the industry.

Recently, I noticed that HPE accounts have been submitted to the Hong Kong Stock Exchange. As the largest provider of fiscal and taxation solutions for micro, small and medium-sized enterprises in China, this may be a good sample for observation.

1. Resonance of policy demand, highly certain growth in the 100 billion dollar market

From an investment perspective, “good track” and “good company” have become important reference elements in the current layout of many investors. Simply put, a good track allows investors to stand in the right direction of investment, and a good company allows investors to obtain a higher return on investment and reduce risk in the right investment direction.

To follow this principle and explore the value of Hewlett-Packard accounts, we need to first tap the growth potential of the company's industry.

In the fiscal and taxation solutions industry for micro, small and medium-sized enterprises, whether it is favorable policies or an increase in market demand, they are important driving factors driving the rapid growth of the industry.

On the one hand, the policy continues to send positive signals to promote the steady development of the fiscal and taxation solutions industry.For example, policies such as the “Accounting Standards for Small Enterprises”, “Opinions of the State Council on Supporting the Healthy Development of Small and Micro Enterprises”, and the “Accounting Law of the People's Republic of China” clearly state that micro, small and medium-sized enterprises are encouraged to seek professional fiscal and taxation solutions.

On the other hand, stimulated by multiple factors in the market, the demand for high-quality fiscal and taxation solutions from micro, small and medium-sized enterprises has risen sharply.The continuous growth in the number and scale of micro, small and medium-sized enterprises, the continuous improvement of efficiency, compliance and digitization requirements for fiscal and taxation management, and the implementation of the fourth financial tax phase have prompted micro, small and medium-sized enterprises to choose professional fiscal and taxation solution providers.

Obviously, the development of the fiscal and taxation solutions market for micro, small and medium-sized enterprises in China is both definitive and growing. This trend has also been clearly reflected in industry data.

According to Frost & Sullivan data, the market is expected to grow from 111.2 billion yuan in 2022 to 186.6 billion yuan in 2027, with a compound annual growth rate of 10.9%, continuing to maintain a good growth momentum. Among them, compared to traditional financial software solutions, the SaaS-based fiscal and taxation solution segment showed a more rapid growth trend.

Data source: Frost & Sullivan

2. A pioneer in the fiscal and taxation solutions industry for micro, small and medium-sized enterprises, showing long-term value in multiple dimensions

Focusing on the Hewlett-Packard account itself from the top down, what exactly is the texture of the account? The author believes that it can be considered from the three levels of industry status, past performance, and core competitiveness.

First, in terms of industry position, Hewlett Packard is the largest provider of fiscal and taxation solutions for micro, small and medium-sized enterprises in China, and has a high scale advantage and brand influence.

Hewlett-Packard accounts have a clear first-mover advantage. Since its establishment in 2015, Hewlett Packard has been committed to empowering micro, small and medium-sized enterprises at different stages of development and vertical industries in China. It is a pioneer in the fiscal and taxation solutions industry for micro, small and medium-sized enterprises in China.

Specifically, Huifan provides a set of AI-enabled solutions that rely on its own SATP system to develop and provide innovative solutions. It focuses on the three key points of efficient management, fine management, and fiscal and taxation compliance to solve the pain points faced by micro, small and medium-sized enterprises in terms of finance and taxation. As of 2021 and December 31, 2022, the company achieved net revenue retention rates of 104.1% and 112.1%, respectively. At the same time, it also provides consulting services (such as commercial registration services, qualification-related services) and matching drainage services to meet the diversified business needs of enterprises.

Source: Prospectus

According to data from Frost & Sullivan, according to the number of SMEs directly served in 2022, Hewlett Packard is the largest provider of fiscal and taxation solutions for micro, small and medium-sized enterprises in China, and has a customer retention rate of as high as 84.9%, far higher than the industry average of 60% to 70%.

Based on this, the author believes that in the context of the rapid growth of the industry, there may be an opportunity to benefit from the scale effect, gain more market share, achieve a virtuous cycle, and consolidate the company's leading position in the industry.

Second, in terms of performance, Hewlett-Packard's revenue gross profit has maintained a high growth rate for three years, and the revenue growth rate far exceeds the industry average.

According to the prospectus, Huipan's revenue increased from 275 million yuan in 2020 to 516 million yuan in 2022, with a compound annual growth rate of 36.9%, exceeding the industry average of 13.6%; gross profit increased from 123 million yuan to 268 million yuan over the same period, with a compound annual growth rate of 47.9%.

The rapid growth in revenue and gross profit confirms the correctness of HPE's business model and business strategy. As the company continues to innovate and optimize to industry and market changes, its existing business model and business strategy will also become more mature and stable to achieve better growth.

Third, in terms of core competitiveness, HuPAN has iteratively upgraded its R&D technical capabilities, providing endogenous impetus for continued development for subsequent growth.

In the field of fiscal and taxation solutions, Hewlett Packard invests in AI and automation technology leading the industry. On the one hand, under the huge model parameters of the SATP system, Huidan accounts are empowered by AI technology to achieve higher automation and intelligence. On the other hand, it also has close ties with customers and rich industry experience in the past ten years. It has improved its SATP system through about 262 million multi-dimensional model parameters related to the business and fiscal processes of micro, small and medium-sized enterprises accumulated in more than 224 million notes. We provide efficient, accurate and intelligent fiscal and taxation solutions for micro, small and medium-sized enterprises to help customers reduce costs and increase efficiency.

According to the prospectus, during the most recent tax period from January to March 2023, the automated delivery rate of SaaS-based solutions provided by HPE accounts to SME customers reached about 80%. With the help of AI and automation technology, the delivery labor cost of Hewlett-Packard was as low as 888 yuan per SME customer in 2022, helping micro, small and medium-sized enterprises obtain high-quality fiscal and taxation solutions at a very low cost.

Overall, the leading position in the industry, continued high performance, and increasing competitiveness all reflect the growth potential and long-term value of Hewlett-Packard accounts.

3. It is expected to be the first to achieve profit

Losses are common on China's SaaS racetracks. Due to the impact of the pandemic over the past three years and continued investment in technology, HPE accounts have also recorded losses in the past three years. However, I have observed that the profit level of Hewlett-Packard accounts has clearly improved. The gross margin increased from 44.5% in 2020 to 49.4% in 2021, and then further increased to 52.0% in 2022. At the same time, the adjusted net loss was seen to narrow significantly in 2022, and the amount of loss was at a low level within the industry.

SaaS companies usually experience a long period of loss. After settling in technology and gaining high customer stickiness, leading companies can gradually achieve profits. The Huiyuan account industry has a broad market space of 111.2 billion yuan in 2022. Under the trend of rapid growth in revenue scale and continuous increase in gross margin, it can obtain obvious economies of scale and is expected to be the first to achieve profit.

4, conclusion

In summary, the “good racetrack” and “good company” are the core logic of value investment recognized by investors. The various characteristics shown by Hewlett-Packard accounts are in line with the corporate image under this logic. As a result, during Angel's turn in the D round of financing, Hewlett Packard received unanimous approval from star investment institutions such as Tencent, Xiaomi, IDG, and Gaocheng. Under the expectations of the positive development of the fiscal and taxation solutions industry for micro, small and medium-sized enterprises, the growth path of Hewlett-Packard accounts is clear. As the company continues to promote the listing process, as a leading enterprise, its strength in various areas such as capital and brand influence is expected to be further strengthened, which is worth paying attention to.