Zhitong Financial APP learned that on the evening of September 10, 2023, Lingxiong Technology (02436) issued a notice saying that the company would resume trading on September 11, 2023. At the same time, a few days ago, Haitong International released a rating report for Lingxiong Technology. Considering that Lingxiong Technology is a leader in China's DaaS (device as a service) field, with industry first-mover advantage, industry competitive advantage and great development potential, the company is estimated to be valued at 4.64 billion yuan in 2023, with a target price of HK $14.15 per share, and maintains a "better than the market" rating, the report said.
The report predicts that the company's total revenue from 2023 to 2025 will be 19.12 shock 24.17 / 3.331 billion yuan, with a 22-25CAGR (compound annual growth rate) of 26% (the recycling business, which used to account for a large proportion of the company's revenue, will maintain a medium-to-low and uniform growth rate, but equipment subscriptions and IT service subscriptions will maintain medium-and high-speed development). The adjusted EBITDA (profit before tax, interest, depreciation and amortization) is 3.69Mab 5.62 / 861 million yuan, and the adjusted net profit is 41.07 million yuan / 149 million yuan / 355 million yuan.
The report further points out that the company's DaaS model has the characteristics of both IDC industry (cabinet leasing), IT operation and maintenance services and SaaS industry. Therefore, companies in these three industries are selected for comparison and weighted average method is used for valuation. Considering that the company is a leader in the DLM field and has a fast number of new customers, but it takes some time to release performance (equipment subscription has a process from stock to increment), we give the company 12.3x EV/EBITDA (IDC) and 2.5x PS (IT operation and maintenance and SaaS). According to estimates, the company's 2023 valuation is 4.64 billion yuan, and the target price is 14.15 Hong Kong dollars per share. Maintain the "better than the market" rating.
In fact, judging from the actual results, the performance of 02436.HK 's DaaS business model in recent years has fully verified the judgment of investors and really did not disappoint them.
Data show that Lingxiong's revenue grew at a compound annual rate of 63.1 per cent from 2019 to 2021. In 2022, Lingxiong's technology revenue continued to rise sharply against the trend to 1.664 billion yuan, with profits and adjusted profits substantially turning from losses to profits over the same period last year, of which profits were nearly 100 million yuan. In the first half of 2023, despite the influence of macro factors such as new difficulties and challenges faced by economic operation, Lingxiong's business model once again showed strong development resilience, achieving revenue of 822 million yuan, and adjusted EBITDA growth of about 5.2% to 134 million yuan compared with the same period last year. In terms of revenue, Lingxiong Technology's revenue has been firmly ranked first in the industry.
Lingxiong Technology has such an excellent performance in the economic cycle that it has been firmly favored by more and more authorities. So, why do the authoritative institutions represented by Haitong International continue to be firmly optimistic about the development prospects of Lingxiong Technology?
The core barrier is deep, the basic market is solid, and the number of new customers continues to grow substantially.
"the business logic of the DaaS industry seems simple, but if you want to be a leader, the threshold is actually very high, and there are high requirements for capital, operational efficiency and scale. As a leading player in the industry, Lingxiong Technology can steadily occupy the leading position in the industry for many years, and continue to maintain an upward momentum of development. " The relevant person in charge of Lingxiong Research Institute believes that, on the one hand, it can accurately grasp the laws of the market and continue to meet market demand, on the other hand, it has built an insurmountable industry core barrier.
What is the law of DaaS market? One of them is that the deeper the service, the stronger the stickiness of the customer. In other words, as the scale of corporate customers becomes larger and larger, their needs will become more and more diversified. in this context, corporate customers tend to choose qualified suppliers with full-stack full-life cycle service capabilities. Because, for customers, this solution is the optimal solution of cost.
Obviously, Lingxiong Technology has accurately grasped this market law, and after taking the lead in completing the layout of the whole industry chain in the DaaS industry, it has innovated and created a digital closed-loop DaaS service model on the basis of digital construction. This model provides full-stack services for enterprises, including equipment subscription service, IT technology subscription service, equipment management SaaS, equipment recycling service and so on. Enterprises can flexibly choose service combinations according to their own development stage and actual needs, thus to a certain extent, enterprises can customize on demand, pay according to use, and help enterprises complete the transformation from purchasing equipment to purchasing services. Effectively solve the pain points of IT equipment lifecycle management in the process of digital transformation of small and medium-sized enterprises, so as to help enterprises reduce operating costs and improve operational efficiency.
"compared with the single equipment subscription service of other market participants in the industry, Lingxiong Technology provides full-product, full-stack and full-life cycle solutions covering IT office equipment (including computers, photocopiers, conference screens, etc.), which greatly improves the user experience of corporate customers, brings them closer to customers, and enhances the stickiness of corporate customers and the return on assets of single customers." Huang Yuewei, general manager of Dachen Caizhi Shanghai Branch, analyzed it.
With the more mature operation of the business model and more in-depth services, Lingxiong Technology has gradually built up the core barriers of the industry. Haitong International Research News pointed out that the industry barriers constructed by Lingxiong Technology include: first, closed-loop DaaS ecology can produce strong synergy, IT equipment utilization is significantly improved, cross-selling consolidates its synergy and high customer stickiness; second, a sound and strong recycling and renovation industry chain has a strong support and synergy for equipment subscription services. Third, the intelligent risk control system is very important to the development of DaaS business, the company maintains a very low bad debt rate all the year round; fourth, the strong support of strategic shareholders.
Among them, each main business is deeply coordinated, and the effect is obvious. Enterprise customers with long-term and short-term equipment subscription services are transformed into each other according to different needs and scenarios at different stages. The meticulous and thoughtful IT technology subscription service greatly improves the user experience of enterprise customers, shortens the distance with customers, enhances the interactive relationship with enterprise customers, and helps the two major businesses of equipment subscription and equipment recycling to win customers. In addition, Lingxiong's industry-leading recycling and renovation capabilities play a strong supporting drainage and synergy effect on equipment subscription services, helping it achieve efficient operation and high-quality service, and ultimately enhance customer experience and enhance customer stickiness. At the same time, it also helps customers optimize equipment use costs.
In addition, deep coordination with strategic shareholders continues to bring valuable resources to Lingxiong Technology. The deep coordination with JD.com has not only brought Lingxiong Technology the flow entrance of tens of millions of enterprise customers, but also reduced the operating costs of Lingxiong Technology in warehousing management, logistics and distribution services. In-depth cooperation with Tencent can not only enable Lingxiong Technology's DaaS solution to benefit all the resident enterprises in Tencent Zhongchuang Space, but also obtain enterprise customers in batches and efficiently through Tencent conference App. In addition, Lenovo not only ensures that Lingxiong's supply chain needs are prioritized and met, but also enhances the trust and loyalty of corporate customers to Lingxiong through sharing Lenovo's original equipment and tailor-made premium services.
Chen Liwei, a partner of Dongfang Fuhai, believes that the barrier of Lingxiong technology business model is higher, and so far it is still unique. Huang Yuewei directly pointed out that industry barriers determine the strength of the strong. With the expansion of the scale, the reduction of costs, the enhancement of the ability to obtain funds, the wider sales network, the higher service efficiency, and the continuous optimization of the information system, the core competitiveness of Lingxiong Technology will also be steadily improved, and it will be difficult for newcomers to surpass it.
Lingxiong Technology continues to build high core barriers to continue to improve the quality of its performance growth, a significant sign is the substantial increase in new customers. Data show that the number of long-term equipment subscription customers of Lingxiong Technology in 2022 increased by about 32.9% compared with the same period last year; the acquisition capacity of major customers continued to grow, and the number of major customers increased by about 26.3% in 2022 compared with the same period last year. In the first half of 2023, the number of new subscribers of Lingxiong Technology increased significantly compared with last year, the number of long-term equipment subscribers increased by about 38.1%, and long-term equipment subscription revenue increased by 13.8%, while the number of IT technology subscription customers also increased by 48.8%.
Haitong International believes that Lingxiong's new customers have increased significantly, laying the foundation for its future revenue transformation. It is expected that from next year, the company's revenue conversion rate will have a more obvious acceleration process.
Scale effect of business modelPositiveHighlight Gross profit margin and net profit will rise sharply
Lingxiong's business model is based on a deep understanding of customer needs. Under the DaaS service model, the DaaS service model can help enterprises reduce the initial investment by 97.4% and reduce operating costs by about 10% to 30% within three years. Enterprises do not have to deal with obsolete equipment on their own, update due, and always maintain the optimal equipment use demand.
Objectively, under the DaaS mode, the light capitalization of enterprise customers is transformed into the heavy asset operation of Lingxiong Technology. However, investors who have long followed, studied and invested in the To B industry all believe that "the asset-heavy operation model happens to be the industry barrier and moat of Lingxiong Technology."
Huang Yuewei believes that, first, heavy assets mean that it is difficult to enter the industry, and it is difficult for ordinary players to come up with large amounts of money to buy equipment at once, and the threshold is relatively high. Second, re-operation means high operational efficiency and needs to achieve fine management through continuous digital construction. Third, the emphasis on service means that the profit of this business model comes from services, and it is necessary to build a strong ecological service system to help enterprises reduce costs and increase efficiency. Fourth, the emphasis on capital means strong financing ability, which can create rich social value and capital value.
"with the increasing scale, the procurement cost of Lingxiong Technology is getting lower and lower, the ability to obtain funds is getting stronger and stronger, the degree of digital information and services are getting higher and higher, and the competitive advantage is getting bigger and bigger. It is very difficult for other competitors and late players to catch up and surpass. "
Reviewing the past performance also fully confirms this point. Data show that during the period from 2019 to 2021, the company's revenue increased from 500 million yuan to 1.33 billion yuan. In 2022, the company's revenue increased by 25.1% compared with the same period last year, reaching 1.664 billion yuan, continuing to be number one in the industry. The fact that Lingxiong has still achieved such good results during the economic downturn fully proves the sustainable growth of Lingxiong's business model, which explains why it continues to be popular with a number of star organizations.
"before each round of investment, we compare the data of Lingxiong Technology with the financial forecasts made in the previous round of investment. from years of observation, we have found that Lingxiong Technology is very good in terms of operational ability, management ability and profit growth. Each stage is fully in line with our investment expectations. This is also the main reason why Dachen Caizhi has increased its investment for four consecutive rounds. " Huang Yuewei said.
It is also worth mentioning that the gross profit margin of Lingxiong Technology will usher in a larger period of improvement. Haitong International believes that a large number of IT equipment purchased by Lingxiong Technology in 2019 will reach a five-year depreciation period next year, so it can be predicted that the gross profit margin of Lingxiong Technology's equipment subscription service will increase with the appearance of economies of scale and the expiration of the depreciation life of the equipment, while the proportion of IT service subscriptions will increase with the proportion of long-term subscriptions to IT services, and the number of single-person equipment will become more and more. If the cost of service per unit falls, the gross profit margin will also increase. Therefore, the company's net profit will be greatly improved synchronously in the next few years.