At present, the economic cycle fluctuates and the investment prospect is complex and changeable. Making investment decisions is like driving in thick fog, making it difficult to gain insight into the road ahead.
Therefore, every investor is faced with an urgent problem: how to find certainty in an uncertain environment.
Taking history as a mirror, we can make clear the gains and losses. Buffett left an excellent example with his investment philosophy: focus on finding companies that have the advantage of "franchising".
"franchising" does not mean that companies have real franchises, but that these companies have established an economic moat in their core business, making them, like "franchising", able to resist competition and achieve long-term steady economic growth.
The core idea of franchise theory is to pursue companies with competitive advantages and solid economic barriers in investment. These companies have stable and predictable profit potential and remain relatively robust even when the economic cycle fluctuates.
The author finds that some companies with the advantage of "franchising" have great potential. For example, the state-level specialization of the new "Little Giant" enterprise Lingxiong Technology (02436.HK) in recent years has shown strong growth resilience and through the cycle of the "core management" attribute.
The fundamentals are sound and good.
One of the most important bases for judging the development prospects of a listed company is its fundamentals. Back to the fundamentals of Lingxiong science and technology, there is no change, and the whole is still sound and good.
An obvious sign is that Lingxiong's business operations have continued to grow significantly in recent years. Data show that from 2019 to 2021, Lingxiong's revenue grew at a compound annual rate of 63.1%. In 2022, Lingxiong Technology revenue continued to grow by 25.1%, reaching 1.664 billion yuan, continuing to be the first in the industry. In particular, it is worth mentioning that in 2022, Lingxiong Technology crossed the break-even point, achieving a profit of 99.95 million yuan, a substantial turnround from losses to profits compared with the same period last year. In the first half of 2023, Lingxiong Technology's adjusted EBITDA (profit before tax, interest, depreciation and amortization) increased by about 5.2% to 134 million yuan compared with the same period last year.
Under the test of many more-than-expected factors such as the impact of COVID-19 's epidemic situation and the sustained economic downturn in recent years, Lingxiong Science and Technology has made such brilliant achievements against the trend, thanks to the industry core barriers it has built in the past 20 years.
Haitong International first coverage research newspaper pointed out that the industry core barriers constructed by Lingxiong Technology include: (1) closed-loop DaaS 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. Can collect as much as possible, collect and rent, and sell on demand, is the core of recycling services, is a strong service, and equipment subscription services play a strong support and synergy; (3) intelligent risk control system is very important to the development of DaaS business, the company maintains a very low bad debt rate, far lower than competitors and industry average; (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.
Taking the synergy of the main business as an example, the equipment recycling business provides a stable equipment source for the equipment subscription business, thus reducing the company's operating costs. In addition, the equipment recycling service is also an important means to reach large customers, and many customers who use the equipment recycling service are transformed into customers who subscribe to the equipment service. Enterprise customers with long-term and short-term equipment subscription services can be transformed into each other according to different needs and scenarios at different stages. The meticulous and thoughtful IT technology subscription service can greatly improve the user experience of enterprise customers, shorten the distance with customers, enhance the interactive relationship with enterprise customers, and help the two major businesses of equipment subscription service and equipment recycling service to win customers.
It is reported that the main business of Lingxiong Technology has a strong synergy effect, which not only further enhances customer stickiness, but also continues to expand the number of customers. Data show that from 2020 to 2021, the growth rates of Lingxiong's major customers were 37.6% and 55.5%, respectively. In 2022, the number of its major customers continued to grow well, reaching 26.3%. 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%.
It is also worth mentioning that the high degree of coordination with Zhan shareholders also makes Lingxiong unique in the DaaS industry. 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.
Through the construction of internal and external ecological service system, Lingxiong Technology has further consolidated the fundamentals, promoted the sustainable growth of its own business, and enhanced the dominance of the industry. " The relevant person in charge of Lingxiong Research Institute said.
DAaSIndustryFlourish
Although the capital market is still in the process of in-depth understanding of the emerging area of the DaaS industry, the process is accelerating with the listing of industry leaders such as Lingxiong Technology on the Hong Kong Stock Exchange.
It is understood that the DaaS industry refers to a comprehensive industry based on IT equipment, engaged in IT equipment leasing, IT technical services, SaaS-based equipment management and IT equipment recycling, which integrates a variety of economic activities. It is a new industry with basic, driving and environmental protection. Among them, IT equipment mainly refers to desktops and notebook computers, printers, photocopiers, servers, mobile phones, network equipment and cloud video conference screens.
According to data from institutions such as Frost Sullivan, the penetration rate of China's DaaS industry is about 5 per cent, while the average penetration rate of the DaaS industry in Europe, the United States and Japan is more than 50 per cent. In addition, the number of commercial computers in China will reach 120 million in 2026. If China's DaaS industry reaches a penetration rate of 50% in the future, there will be nearly 60 million computers in the entire DaaS market. If each unit rents for 1000 yuan, the equipment subscription service market alone will have a scale of 60 billion yuan. Some institutions estimate that China's DaaS market is at least 100 billion in scale and has a broad space.
Various signs show that this 100 billion-level market space has ushered in unprecedented release conditions.
According to the Ministry of Industry and Information Technology, the number of small and medium-sized and micro enterprises in China has exceeded 52 million in 2022. Some institutions have shown that strengthening the digital transformation and empowerment of small and medium-sized enterprises is the key to the steady development of China's economy with high quality. In this context, the major enterprises have higher and higher requirements for the performance of IT equipment, and the expenditure on hardware will reach 2 trillion yuan in 2026, which will further drive the continuous expenditure of enterprises on IT equipment. Hot knowledge Consulting estimates that the size of China's DaaS market will reach 138.2 billion yuan in 2026.
Industry insiders pointed out that in recent years, the complexity, severity, and uncertainty of the development environment have increased due to the impact of multiple than-expected factors such as the frequent spread of the COVID-19 epidemic. In this context, enterprises attach great importance to cash flow, reduce costs and efficiency, reduce one-time expenses, improve operational efficiency and resist business risks. The DaaS service can reduce the operating cost by 30% in three years, and greatly improve the operational efficiency, which is well recognized by the enterprise. More and more enterprises are regarding DaaS service as the rigid requirement of enterprise operation.
In recent years, COVID-19 's epidemic has objectively promoted the popularity of flexible offices in China, and further stimulated the demand of enterprises for emerging IT equipment, while the flexibility of DaaS services in the procurement and management of IT office equipment has fully catered to the customized needs of enterprises. This situation will further promote the rapid expansion of China's DaaS market. " The relevant person in charge of Lingxiong Research Institute analyzed, "China's DaaS industry has ushered in a historical opportunity for rapid development."
Institutions and shareholders are firmly optimistic about future value.
Hundreds of billions of DaaS industry ushered in the window opportunity period. Lingxiong Technology, as the pioneer and leader of the industry, has made an important contribution to this in the past 20 years. Similarly, Lingxiong Technology also benefits from the back-feeding effect of the rapid growth of the industry.
According to the cautionary report, from 2019 to 2021, the CAGR (compound annual average growth rate) of the entire DaaS industry was 32%, and the CAGR of Lingxiong Technology was over 60%, much higher than the industry average. Haitong International report believes that the competition barrier of the DaaS industry is actually very high, especially to become an industry leader, including sufficient capital, strong customer acquisition capacity, extensive service network, perfect DaaS closed-loop ecological chain, effective risk control management system and digital operation capability. This is also the core reason why Lingxiong Technology has been able to maintain its leading position in the industry for many years.
The bank estimates that Lingxiong Technology will be valued at 4.64 billion yuan in 2023, with a target price of 14.15 Hong Kong dollars per share, and is expected to achieve a total revenue of 19.12 yuan 24.17 / 3.331 billion yuan in 2023-2025, with an adjusted net profit of 41.07 million yuan / 149 million yuan / 355 million yuan. The bank said that in the next few years, the company's gross profit margin and net profit will be greatly increased.
In view of the long-term growth of Lingxiong's main business is stable and has high visibility, its war shareholders are also firm long-term bullish. Dongfang Fuhai partner Chen Liwei is highly optimistic about Lingxiong's business model, strong growth ability and digital construction ability. "its future value space is huge."
Huang Yuewei, general manager of Dachen Caizhi Shanghai Branch, said that the DaaS industry is an industry with obvious scale advantages and very testing service ability. Lingxiong Technology already has strong scale barriers, and the larger the scale, the higher the barriers, and it is very difficult for competitors to surpass them.
"under the trend of enterprises belittling assets, the business model of equipment lifecycle management will become the mainstream of the market. Lingxiong Technology, which has become one of the leading enterprises in the industry, has prominent service value, stable profit model and obvious scale effect. With the help of capital, more considerable development will be achieved." Tang Mengyuan, general manager of Shenzhen High-tech Investment Zhengxuan Equity Investment Fund Management Co., Ltd., said, "long-term firmly optimistic about the future development and value of Lingxiong technology."
Some institutions said that Lingxiong Technology's profit model has been successful. The company's performance in 2022 went against the trend and continued to grow at a high speed of more than 25% and substantially turn losses into profits, which is a side proof. In the next few years, as Lingxiong's economies of scale continue to highlight, the company is expected to make a substantial profit and will show its intrinsic value to the outside world.